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Notes to and forming part of the financial statements

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 (PGPA Act).

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.

New Accounting Standards

Adoption of New Australian Accounting Standard Requirements

No accounting standard has been adopted earlier than the application date as stated in the standard. There have been no other new, revised or amended standards or interpretations issued by the Australian Accounting Standards Board prior to the sign off date that are applicable to the current reporting period that have a material effect, or that are expected to have a future material effect, on the Agency’s financial statements.

Future Australian Accounting Standard Requirements

The following new, revised, amended standards and/or interpretations were issued by the Australian Accounting Standards Board prior to the signing of the statements by the Accountable Authority and Chief Financial Officer. They are expected to have a financial impact on the Agency’s financial statements for future reporting periods.

Standard/Interpretation

Application date for TEQSA

Nature of impending change/s in accounting policy and likely impact on initial application

AASB 16 Leases

1 July 2019

Nature: The revised standard replaces AASB 117 Leases and provides a single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases unless the lease term is 12 months or less, or the underlying asset has a low value. Lessors continue to classify leases as operating or finance, with AASB 16's approach to lessor accounting substantially unchanged from its predecessor, AASB 117.

Likely Impact: Expected to have an impact on the recognition, measurement and disclosure of lessee accounting.

All other new, revised, amended standards and/or interpretations that were issued prior to the sign-off date and are applicable to future reporting period(s) are not expected to have a future material impact on the Agency's financial statements.

Accounting Policies

Other non-financial assets

Other non-financial assets consist of prepayments which are expected to be consumed within the next 12 months.

Finance Costs

All borrowing costs are expensed as incurred.

Rendering of Services

Revenue from the 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 TEQSA.

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 (2018: 30 days), are recognised at the nominal amounts due less any impairment allowance account. Collectability of debts is reviewed at end of the reporting period. Allowances are made when collectability of the debt is no longer probable.

Taxation

The entity 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 TEQSA.

Administered

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

1. Financial Performance

This section analyses the financial performance of the Tertiary Education Quality and Standards Agency for the year ended 2019.

1.1 Expenses

2019

2018

$'000

$'000

1.1A: Employee Benefits

Wages and salaries

6,366

5,409

Superannuation

Defined contribution plans

691

534

Defined benefit plans

324

322

Leave and other entitlements

850

629

Total employee benefits

8,231

6,894

Accounting Policy

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

1.1B: Suppliers

Goods and services supplied or rendered

Consultants

372

386

Contractors

2,882

2,684

Travel

420

370

IT services

799

542

Expert fees

598

494

Legal fees

337

420

Recruitment and training

317

236

Property operating expenses

213

181

Other

687

693

Total goods and services supplied or rendered

6,625

6,006

Goods supplied

371

137

Services rendered

6,254

5,869

Total goods and services supplied or rendered

6,625

6,006

Other suppliers

Operating lease rentals

1,271

1,172

Workers compensation expenses

75

88

Total other suppliers

1,346

1,260

Total suppliers

7,971

7,266

Leasing commitments

TEQSA has two operating leases in relation to office accommodation for its Melbourne offices. The main lease commenced in 2011-12 and expires on 30 April 2022, with a five year option. The second lease commenced in May 2019 and expires in June 2020.

Lease payments are subject to annual fixed percentage increases in accordance with the lease agreements.

2019

2018

$'000

$'000

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

Within 1 year

2,356

1,659

Between 1 to 5 years

3,776

5,110

Total operating lease commitments (inc. GST)

6,132

6,769

Note: Commitments are GST inclusive where relevant.

Accounting Policy

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

1.2 Own-Source Revenue and Gains

2019

2018

$'000

$'000

Own-Source Revenue

1.2A: Rental Income

Operating lease

Sublease rental

266

255

Total rental income

266

255

Subleasing rental income commitments

TEQSA in its capacity as lessor sublets office accommodation. The sublease commenced on 21 September 2015 and expires on 28 February 2022.

Lease receipts are subject to a fixed percentage annual increase in accordance with the sublease agreement.

Commitments for sublease rental income receivables are as follows:

Within 1 year

315

283

Between 1 to 5 years

557

797

Total sublease rental income commitments

872

1,080

Note: Commitments are GST inclusive where relevant.

1.2B: Revenue from Government

Appropriations

Departmental appropriations

17,938

14,072

Total revenue from Government

17,938

14,072

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 TEQSA gains control of the appropriation, except for certain amounts that relate 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 Tertiary Education Quality and Standards Agency does not control but administered on behalf of the Government. Unless otherwise noted, the accounting policies adopted are consistent with those applied for departmental reporting.

2.1 Administered - Expenses

For the year ended 30 June 2019, no administered expenses had been incurred by TEQSA (2018: Nil).

2.2 Administered - Income

2019

2018

$'000

$'000

Revenue

Non-Taxation Revenue

2.2A: Fees

Fees from regulatory services

1,969

2,307

Total fees

1,969

2,307

Accounting Policy

All administered revenues are revenues relating to ordinary activities performed by TEQSA on behalf of the Australian Government.

Revenue is generated from partial cost recovery arrangements for specific services to higher education providers. Fees are charged on registration and re-registration of providers, accreditation and re-accreditation of courses, and major variations to registrations and accreditations. Administered revenue is recognised on receipt of applications form the higher education providers.

3. Financial Position

This section analyses the Tertiary Education Quality and Standards Agency 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

2019

2018

$'000

$'000

3.1A: Cash and Cash Equivalents

Cash at bank

174

160

Cash - third party accounts

115

-

Total cash and cash equivalents

289

160

Accounting Policy

Cash and cash equivalents

Cash is recognised at its nominal amount. Cash and cash equivalents include cash on hand and deposits in bank accounts.

3.1B: Trade and Other Receivables

Goods and services receivables

Goods and services

21

14

Total goods and services receivables

21

14

Appropriations receivables

Appropriation receivable

9,497

5,819

Total appropriations receivables

9,497

5,819

Other receivables

GST receivable from the Australian Taxation Office

204

178

Sublease incentive

73

100

Operating sublease receivable

99

123

Other

19

14

Total other receivables

395

415

Total trade and other receivables (net)

9,913

6,248

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.

3.2 Non-Financial Assets

3.2A: Reconciliation of the Opening and Closing Balances of Property, Plant and Equipment and Intangibles

Buildings -

Leasehold

Improvements

Plant and

Equipment

Intangibles -

Computer

Software1

Total

$’000

$’000

$’000

$’000

As at 1 July 2018

Gross book value

1,158

658

3,550

5,366

Accumulated depreciation, amortisation and impairment

(342)

(197)

(1,866)

(2,405)

Total as at 1 July 2018

816

461

1,684

2,961

Additions

Purchase

-

150

21

171

Internally developed

-

-

210

210

Revaluations and impairments recognised in other comprehensive income

14

(4)

-

10

Depreciation and amortisation

(212)

(167)

(696)

(1,075)

Other movements

-

-

-

-

Disposals

-

(15)

(221)

(236)

Total as at 30 June 2019

618

425

998

2,041

Total as at 30 June 2019 represented by

Gross book value

618

482

3,426

4,526

Accumulated depreciation, amortisation and impairment

-

(57)

(2,428)

(2,485)

Total as at 30 June 2019

618

425

998

2,041

1The carrying amount of computer software includes $27,513 of purchased software and $970,382 of internally generated.

All items of plant and equipment and intangible assets were assessed for indications of impairment as at 30 June 2019 and no indicators of impairment were found.

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

Accounting Policy

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.

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 $2,000 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).

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 TEQSA where there exists an obligation to restore the property to its original condition. These costs are included in the value of TEQSA'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 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.

TEQSA's leasehold improvements and property, plant and equipment are stated at their revalued amounts, being the fair value at the date of revaluation, less any subsequent accumulated depreciation. The fair value measurements of TEQSA's leasehold improvements and plant and equipment as at 30 June 2019 were performed by Jones Lang LaSalle (JLL). JLL have appropriate experience in the fair value measurement of similar assets in the Government sector.

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 is 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. The estimated useful lives, residual values and depreciation 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:

Asset Class

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 TEQSA were deprived of the asset, its value in use is taken to be its depreciated replacement cost.

Fair Value

All leasehold improvements and plant and equipment are measured at their estimated fair value in the Statement of Financial Position. All leasehold improvements and plant and equipment held by TEQSA are categorised under Level 3 in accordance with the hierarchy listed in AASB 13. TEQSA's policy is to recognise transfers into and out of the fair value hierarchy levels as at the end of the reporting period.

Level 3 measurements use inputs to estimate fair value where there are no observable market prices for the assets being valued. The future economic benefits of TEQSA's leasehold improvements and property, plant and equipment are not primarily dependent on their ability to generate cash flows. TEQSA has not disclosed quantitative information about the significant unobservable inputs for the level 3 measurements in these classes.

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

TEQSA's intangibles comprise of 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 TEQSA's software are 3 to 5 years (2018: 3 to 5 years).

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

Accounting Judgements and Estimates

The estimated fair value of leasehold improvements, plant and equipment is determined by an independent valuer and is subject to management assessment on an annual basis.

3.3 Payables

2019

2018

$'000

$'000

3.3A: Suppliers

Trade creditors and accruals

628

494

Total suppliers

628

494

Settlement is usually made within 30 days (2018: 30 days).

3.3B: Other Payables

Salaries and wages

75

50

Superannuation

10

7

Lease incentive

483

654

Operating lease payable

480

553

Unearned income

115

-

Other

1

1

Total other payables

1,164

1,265

Accounting Policy

Accounting policies for payables is contained in the Managing Uncertainties section.

3.4 Other Provisions

3.4A: Other Provisions

Provision for restoration1

Provision for onerous contracts2

Total

$’000

$’000

$’000

As at 1 July 2018

469

357

826

Additional provisions made

47

-

47

Amounts used

-

(76)

(76)

Amounts reversed

-

(5)

(5)

Unwinding of discount or change in discount rate

11

22

33

Total as at 30 June 2019

527

298

825

1 TEQSA currently has 1 (2018: 1) agreement for the leasing of office space which requires the premises to be restored to their original condition at the conclusion of the lease. TEQSA has made a provision to reflect the present value of this obligation.

2TEQSA currently has 1 (2018: 1) sublease agreement whereby the economic benefit of the rental income derived is less than the operating lease expense incurred. TEQSA has made a provision to reflect the present value of the expected costs to be incurred that are in excess of the economic benefit expected to be derived from the lease.

Accounting Judgements and Estimates

Provision for onerous contracts

TEQSA has made a provision for its onerous obligations under non-cancellable operating leases where the rental expense is in excess of the rental income received. When the present value of the future cash flows receivable from the operation of leased assets is less than the present value of the rental payments to which TEQSA is committed, TEQSA applies the shortfall firstly against the carrying amount of the assets, and then provides for any further onerous element of the contract.

4. Assets and Liabilities Administered on behalf of Government

This section analyses assets used to conduct operations and the operating liabilities incurred which the Tertiary Education Quality and Standards Agency 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.

4.1 Administered - Assets

As at 30 June 2019, TEQSA held no administered assets (2018: Nil).

4.2 Administered - Liabilities

As at 30 June 2019, TEQSA held no administered liabilities (2018: Nil).

5. Funding

This section identifies the Tertiary Education Quality and Standards Agency funding structure.

5.1 Appropriations

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

Annual Appropriations for 2019

Annual Appropriation1

Adjustments to appropriation2

Total appropriation

Appropriation applied in 2019 (current and prior years)

Variance3

$'000

$'000

$'000

$'000

$'000

Departmental

Ordinary annual services

17,938

1,360

19,298

17,266

2,032

Capital Budget4

1,646

-

1,646

411

1,235

Other services

-

-

-

-

-

Equity Injections

-

-

-

-

-

Total departmental

19,584

1,360

20,944

17,677

3,267

1In 2018-19, there were no appropriations which have been withheld (Section 51 of the PGPA Act) and quarantined for administration purposes.

2 In 2018-19, adjustments to appropriation comprises of $1.360 million of PGPA Act Section 74 receipts.

3 In 2018-19, the variance between total appropriation and appropriation applied in 2019 for ordinary annual services relates to payments funded from unspent prior year appropriation items.

4 Departmental and Administered Capital Budgets are appropriated through Appropriation Acts (No.1,3,5). They form part of ordinary annual services, and are not separately identified in the Appropriation Acts.

Annual Appropriations for 2018

Annual Appropriation1

Adjustments to appropriation2

Total appropriation

Appropriation applied in 2018 (current and prior years)

Variance3

$'000

$'000

$'000

$'000

$'000

Departmental

Ordinary annual services

14,072

1,174

15,246

14,928

318

Capital Budget4

851

-

851

918

(67)

Other services

Equity Injections

100

-

100

-

100

Total departmental

15,023

1,174

16,197

15,846

351

Administered

Ordinary annual services

-

-

-

-

-

Capital Budget4

-

-

-

-

-

Administered items

-

-

-

-

-

Other services

-

-

-

-

-

Total administered

-

-

-

-

-

1 In 2017-18, there were no appropriations which have been withheld (Section 51 of the PGPA Act) and/or quarantined for administration purposes.

2 In 2017-18, adjustments to appropriation comprised $1.174 million of PGPA Act Section 74 receipts.

3 In 2017-18, the variance between total appropriation and appropriation applied in 2018 for Ordinary Annual Services relates to additional funding allocated at the 2017-18 MYEFO budget round which has not been fully utilised.

4 Departmental and Administered Capital Budgets are appropriated through Appropriation Acts (No.1,3,5). They form part of ordinary annual services, and are not separately identified in the Appropriation Acts.

2019

2018

$'000

$'000

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

Departmental

Appropriation Act (No. 1) - Capital Budget (DCB) 2016-171

504

504

Supply Act (No. 1) - Capital Budget (DCB) 2016-171

115

115

Appropriation Act (No. 1) 2017-18

-

2,283

Appropriation Act (No. 1) - Capital Budget (DCB) 2017-18

440

851

Appropriation Act (No. 2) - Equity Injection 2017-18

100

100

Appropriation Act (No. 3) 2017-18

-

2,126

Appropriation Act (No. 1) - Operating 2018-19

6,866

-

Appropriation Act (No. 1) - Capital Budget (DCB) 2018-19

1,646

-

Total departmental

9,671

5,979

1 Funding from budget year 2016-17 lapsed on 1 July 2019 with the repeal of Supply Act (No. 1) 2016-17 and Appropriation Act (No. 1) 2016-17.

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

Appropriation

Applied

2019

2018

Authority

Type

Purpose

$'000

$'000

Public Governance, Performance and Accountability Act 2013

Refund

To provide for payments under s.77 of the PGPA Act. All transactions under this Act are recognised as Administered items.

6

47

Total special appropriations applied

6

47

5.2 Regulatory Charging Summary

2019

2018

$'000

$'000

Amounts applied

Departmental

Annual appropriations

17,174

10,124

Total amounts applied

17,174

10,124

Expenses

Departmental

16,408

9,613

Total expenses

16,408

9,613

External revenue

Administered

1,969

2,307

Total external revenue

1,969

2,307

Regulatory charging activities:

TEQSA has in place partial regulatory charging for specified services to higher education providers including: registration and re-registration of providers; accreditation and re-accreditation of courses; and major variations to registrations and accreditations.

All fee revenue from regulatory charging activities is administered revenue and is returned to the Consolidated Revenue Fund. TEQSA does not have any administered expenses.

Documentation (Cost Recovery Implementation Statement) for the above activities is available at

https://www.teqsa.gov.au/fees.

5.3 Net Cash Appropriation Arrangements

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

1,829

342

Plus: depreciation/amortisation expenses previously funded through revenue appropriation

( 1,075)

( 873)

Total comprehensive income/(loss) - as per the Statement of Comprehensive Income

754

( 531)

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

2019

2018

$'000

$'000

6.1: Employee Provisions

Leave

2,060

1,490

Total employee provisions

2,060

1,490

Accounting Policy

Liabilities for short-term employee benefits and termination benefits expected within twelve 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 liability for long service leave has been determined by reference to the Public Governance, Performance and Accountability (Financial Reporting) Rule 2015 (FRR) 24.1(a) using the shorthand method. 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 Public Sector Superannuation Scheme (PSS), the PSS accumulation plan (PSSap), or other superannuation funds held outside the Australian Government. The PSS is a 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.

TEQSA 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, and 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.

6.2 Key Management Personnel Remuneration

Key Management Personnel (KMP) are those persons having authority and responsibility for planning, directing and controlling the activities of TEQSA, directly or indirectly, including any director (whether executive or otherwise) of TEQSA.

TEQSA has determined KMP to be the Commissioners and the Chief Executive Officer. KMP remuneration is reported in the table below:

2019

2018

$'000

$'000

Short-term employee benefits

917

1,608

Post-employment benefits

48

181

Other long-term employee benefits

14

126

Total key management personnel remuneration expenses1

979

1,915

The total number of key management personnel that are included in the above table is 5 (2018: 10). The Chief Financial Officer and Directors are no longer classified as Key Management Personnel.

1. The above KMP 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 TEQSA.

6.3 Related Party Disclosures

Related party relationships:

TEQSA is an Australian Government controlled entity. Related parties to TEQSA are those identified as Key Management Personnel including the Portfolio Minister.

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. These transactions have not been separately disclosed in this note.

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

● Anthony McClaran (Chief Executive Officer) is an Audit Committee Member of the Australian Accounting Standards Board (AASB). TEQSA subleases office space to AASB under a MOU arrangement. The value of the transaction for the 2018-19 financial year is $265,887 (2018: $254,780).

None of the above KMP played any role in Agency decisions in relation to their related party transactions noted above.

7. Managing Uncertainties

This section analyses how the Tertiary Education Quality and Standards Agency manages financial risks within its operating environment.

7.1 Contingent Assets and Liabilities

7.1A: Contingent Assets and Liabilities

TEQSA had no departmental contingent assets or liabilities at 30 June 2019 (2018: Nil).

7.1B: Administered - Contingent Assets and Liabilities

TEQSA had no administered contingent assets or liabilities at 30 June 2019 (2018: Nil).

7.2 Financial Instruments

2019

2018

$'000

$'000

7.2A: Categories of Financial Instruments

Financial Assets under AASB 139

Loans and receivables

Cash and cash equivalents

160

Trade and other receivables - goods and services

28

Total loans and receivables

188

Financial Assets under AASB 9

Financial assets at amortised cost

Cash and cash equivalents

289

Trade and other receivables - goods and services

40

Total Financial assets at amortised cost

329

Total financial assets

329

188

Financial Liabilities

Financial liabilities measured at amortised cost

Trade creditors and accruals

628

494

Total financial liabilities measured at amortised cost

628

494

Total financial liabilities

628

494

7.2A: Categories of Financial instruments - Continued

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

Financial assets class

Note

AASB 139

original classification

AASB 9

new classification

AASB 139

carrying amount at 1 July 2018

AASB 9

carrying amount at 1 July 2018

$'000

$'000

Cash and cash equivalents

3.1A

Held-to-maturity

Amortised Cost

160

160

Trade and other receivables - goods and services

3.1B

Held-to-maturity

Amortised Cost

28

28

Total financial assets

188

188

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

$’000

$’000

$’000

$’000

Financial assets at amortised cost

Loans and receivables

Cash and cash equivalents

160

160

-

160

Trade and other receivables - goods and services

28

28

-

28

Total amortised cost

188

188

-

188

7.2A: Categories of Financial instruments - Continued

Accounting Policy

Financial assets
With the implementation of AASB 9 Financial Instruments for the first time in 2019, TEQSA classifies its financial assets in the following category:

  • financial assets measured at amortised cost.

The classification depends on both TEQSA's business model for managing the financial assets and contractual cash flow characteristics at the time of initial recognition. Financial assets are recognised and derecognised 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's:

(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 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

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’.

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).

8. Other Information

8.1 Aggregate Assets and Liabilities

2019

2018

$'000

$'000

8.1A: Aggregate Assets and Liabilities

Assets expected to be recovered in:

No more than 12 months

8,686

6,582

More than 12 months

3,859

2,961

Total assets

12,545

9,543

Liabilities expected to be settled in:

Current Liabilities

2,321

2,997

More than 12 months

2,356

1,078

Total liabilities

4,677

4,075

8.1B: Administered - Aggregate Assets and Liabilities

As at 30 June 2019, TEQSA held no administered assets or liabilities (2018: Nil).