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      • Annual Report 2008-09 Financial Statements

Annual Report 2008-09 Financial Statements

• Independent Auditor's Report
• Statement by the Chief Executive Officer and Chief Finance Officer
• Financial Statements
• Notes to and forming part of the Financial Statements

Independent Auditor's Report

Statement by the Chief Executive Officer and Chief Finance Officer

In our opinion, the attached financial statements for the year ended 30 June 2009 have been prepared based on properly maintained financial records and give a true and fair view of the matters required by the Finance Minister's Orders made under the Financial Management and Accountability Act 1997, as amended.

Roger Wilkins Chief Executive 27 August 2009

Stephen Lutze Chief Finance Officer 27 August 2009

Financial Statements

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

¹ In 2008-09, the Minister for Finance and Deregulation repealed the 2007-08 determination to reduce appropriation by $1,251,000, and substituted the reduction with a smaller amount of $797,000, resulting in a balance of $454,000 being recognised in equity.

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

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

¹ Outstanding contractual payments for fitout under construction.

² Plant and equipment commitments are primarily contracts for the development of a personal property securities register.

³ Operating leases included are effectively non-cancellable and comprise:

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

Unquantifiable and material contingencies are disclosed in Note 12: Contingent Assets and Liabilities.

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

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

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

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

¹ Infrastructure, plant and equipment commitments are primarily contracts for the upgrade of airport facilities in the Indian Ocean Territories.

² Other commitments is grant amounts payable under agreements in respect of which the grantee has yet to provide the services required under the agreement.

Elements of these commitments are fully funded in forward estimates.

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

Unquantifiable and material contingencies are disclosed in Note 21: Administered contingent assets and liabilities.

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

Note 1: Summary of Significant Accounting Policies

1.1   Objectives of the Attorney-General's Department

The Attorney-General's Department (the Department) is the central policy and coordinating element of the Attorney-General's portfolio.

The Department provides expert advice, policy development and program implementation services to the Attorney-General, the Minister for Home Affairs and the Australian Government more broadly under three outcomes:

• Outcome 1: An equitable and accessible system of federal civil justice;
• Outcome 2: Coordinated federal criminal justice, security and emergency management activity, for a safer Australia; and
• Outcome 3: Assisting regions to manage their own futures.

Contributions to Outcome 1

Contributions to Outcome 2

Contributions to Outcome 3

The activities of the Department contributing toward these outcomes are classified as either departmental or administered, with all Administered items and related notes being highlighted in grey.

Departmental activities involve the use of assets, liabilities, revenues and expenses controlled or incurred by the Department in its own right.  Administered activities involve the management or oversight by the Department, on behalf of the Government, of items controlled or incurred by the Government.

The continued existence of the Department in its present form and with its present programs is dependent on Government policy and on continuing appropriations by Parliament for the Department’s administration and programs.

1.2   Basis of preparation of the financial report

The financial statements are required by section 49 of the Financial Management and Accountability Act 1997 and are a general purpose financial report.

The financial statements and notes have been prepared in accordance with:

• Finance Minister’s Orders for Financial Reporting (FMOs) for reporting periods ending on or after 1 July 2008, and
• Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) that apply for the reporting period including Interpretations issued by the AASB that apply for the reporting period.

The financial report has been prepared on an accrual basis and is in accordance with historical cost convention, except for certain assets 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 report is presented in Australian dollars and values are rounded to the nearest thousand dollars unless otherwise specified.

Unless an alternative treatment is specifically required by an Accounting Standard or the FMOs, assets and liabilities are recognised in the balance sheet when and only when it is probable that future economic benefits will flow to the Department, or a future sacrifice of economice benefits will be required, and the amounts of the assets or liabilities can be reliably measured.  However, assets and liabilities arising under agreements equally proportionately unperformed are not recognised unless required by an Accounting Standard.  Liabilities and assets that are unrealised are reported in the Schedule of Commitments and the Schedule of Contingencies (other than unquantifiable or remote contingencies, which are reported at Note 12).

Unless alternative treatment is specifically required by an Accounting Standard, income and expenses are recognised in the Income Statement when and only when the flow, consumption or loss of economic benefits has occurred and can be reliably measured.

Administered revenues, expenses, assets and liabilities and cash flows reported in the Schedule of Administered Items and related notes are accounted for on the same basis and using the same policies as for departmental items except where otherwise stated at Note 1.21.

1.3   Significant accounting judgements and estimates

In the process of applying the accounting policies listed in this note, the Department has made the following judgements that have the most significant impact on the amounts recorded in the financial statements:

• the fair value of land and buildings has been taken to be the market value of similar properties.  In some instances, the Department's buildings are purpose built and may in fact realise more or less in the market, and

• the fair value of the Department’s infrastructure, plant and equipment has been taken to be the market selling price.
• The fair value of land administered on behalf of the Australian Government has been taken to be the market value of similar properties. The fair value of individual land parcels has been considered representative of their existing use and the fundamental assumption that they could be sold on a freehold basis
• the fair value of artwork within the Nolan collection that is either owned or controlled by the Australian Government is determined using indicative market rates, and
• an actuarial assessment was made of the liability in relation to judges’ pensions (personal benefits in the Schedule of Administered Items) in accordance with AASB 119.

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 within the next accounting period.

1.4   Statement of compliance

Adoption of new Australian Accounting Standard requirements

No accounting standard has been adopted earlier than the application date as stated in the standard. The following new standards are applicable to the current reporting period:

• AASB 2007-9 Amendments to Australian Accounting Standards arising from the Review of AASs 27, 29 and 31 relocated a number of paragraphs from AASs 27, 29 and 31 that were substantively unamended into the following existing standards AASB 3,   5, 8, 101, 114, 116, 127, 137.
• AASB1004 Contributions also received a number of substantively unamended paragraphs from AASs 27, 29 and 31 following their withdrawal.
  
• AASB1050 Administered Items and AASB1052 Disaggregated Disclosures were created and received a number of substantively unamended paragraphs from AASs 27 and 29.

It is not expected that the relocation of AASs 27, 29 and 31 will have a material financial impact but will affect the disclosures presented in future financial reports.

• AASB1051 Land Under Roads was created and replaces AASs 27, 29 and 31 in respect of land under roads.  The new standard allows entities to recognise or not to recognise as an asset, land under roads acquired before the end of the first reporting period ending on or after 31 December 2007.  Attorney-General's Department elects not to recognise land under roads as an asset. The standard also clarifies that the principles in other standards (including AASB 116 Property, Plant and Equipment) apply to land under roads, except to the extent that AASB 1051 requires or permits otherwise, including the requirement that land under roads acquired after the end of the first reporting period ending on or after 31 December 2007 is accounted for in accordance with AASB 116. It is not practicable to determine the financial impact this will have for the Department.

Future Australian Accounting Standard requirements

The following new standards, amendments to standards or interpretations have been issued by the Australian Accounting Standards Board but are effective for future reporting periods. It is estimated that the impact of adopting these pronouncements when effective will have no material financial impact on future reporting periods. 

AASB 3 Business Combinations
AASB 8 Operating Segments
AASB 101 Presentation of Financial Statements
AASB 123 Borrowing Costs
AASB 2007-3 Amendments to Australian Accounting Standards arising from AASB 8
AASB 2007-6 Amendments to Australian Accounting Standards arising from AASB 123
AASB 2007-8 Amendments to Australian Accounting Standards arising from AASB 101
AASB 2008-1 Amendments to Australian Accounting Standard - Share-based Payments: Vesting Conditions and Cancellations
AASB 2008-2 Amendments to Australian Accounting Standards – Puttable Financial Instruments and Obligations arising on Liquidation
AASB 2008-3 Amendments to Australian Accounting Standards arising from AASB 3 and AASB 127

1.5   Changes in accounting policy and correction of errors

In previous years, the Department recognised grant funding received from the Insolvency and Trustee Service Australia (ITSA) under the Proceeds of Crime Act 2002 (POCA) for Non-Government Organisations (NGO) as Departmental revenue.  Following a review of the Department's accounting policy in relation to POCA receipts, it was determined that these receipts are Administered in nature and should be recorded in the "Services on behalf of other Governments and non public bodies" Special Account.  Accordingly, the Department has restated its comparatives in the Departmental and Administered financial statements in accordance with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors.

During 2007-08, the Department received POCA receipts of $4,000,000 and made related NGO grant payments of $2,436,959.  Respectively, these were recognised as revenue and expense in that financial year.

The Department also received POCA receipts and made payments to NGO in earlier financial years.  The opening retained surplus as at 1 July 2007 was restated to reflect those transactions.

Adjustments to the Departmental financial statements for 2007-08 are as follows:

Adjustments to the Administered financial statements for 2007-08 are as follows:

1.6   Transactions with the Government as owner

Equity injections

Amounts appropriated which are designated as ‘appropriation - equity injection’ for a year (less any formal reductions) are recognised directly in contributed equity in that year.

Restructuring of administrative arrangements

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

Other distributions to owners

The FMOs require that distributions to owners be debited to contributed equity unless in the nature of a dividend.

1.7   Revenue

Revenue from Government

Amounts appropriated for departmental outputs appropriations for the year (adjusted for any formal additions and reductions) are recognised as revenue when the Department gains control of the appropriation, except for appropriations which 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.

Other types of revenue

Revenue from the sale of goods is recognised when:

• the risks and rewards of ownership have been transferred to the buyer
• the seller retains no managerial involvement nor effective control over the goods
• the revenue and transaction costs incurred can be reliably measured, and
• it is probable that the economic benefits associated with the transaction will flow to the Department.

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:

• the amount of revenue, stage of completion and transaction costs incurred can be reliably measured, and
• the probable economic benefits associated with the transaction will flow to the Department. 

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 provision for bad and doubtful debts.  Collectability of debts is reviewed at balance date. Provisions are made when collectability of the debt is no longer probable.

Interest revenue is recognised using the effective interest method as set out in AASB 139 Financial Instruments: Recognition and Measurement.

1.8   Gains

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.

Contributions of assets at no cost of acquisition or for nominal consideration are recognised as gains at their fair value when the asset qualifies for recognition, unless received from another Australian Government agency or authority as a consequence of a restructuring of administrative arrangements (refer to Note 1.6).

Sale of assets

Gains from disposal of non-current assets are recognised when control of the asset has passed to the buyer.

1.9   Employee benefits

Liabilities for services rendered by employees are recognised at the reporting date to the extent that they have not been settled.

Liabilities for ‘short-term employee benefits’ (as defined in AASB 119) and termination benefits due within twelve months of balance date 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.

All other employee benefit liabilities are measured at the present value of the estimated future cash outflows to be made in respect of services provided by employees up to the reporting date. 

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 leave is non-vesting and the average sick leave taken in future years by employees of the Department is estimated to be less than the annual entitlement for sick leave.

The leave liabilities are calculated on the basis of employees’ remuneration, including the Department’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 actuarial advice.  The estimate of the present value of the liability takes into account attrition rates and pay increases through promotion and inflation.

Separation and redundancy

The Department recognises a provision for termination when it is demonstrably committed to either:
(a)   terminate the employment of an employee or group of employees before the normal retirement date, or
(b)   provide termination benefits as a result of an offer made in order to encourage voluntary redundancy.

The Department is demonstrably committed when, and only when it has developed a detailed formal plan for the terminations and there is a valid expectation, with the affected employees, that the terminations will occur.

Superannuation

The majority of the staff of the Department are members of the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS) or the PSS accumulation plan (PSSap). From 1 July 2005, new employees are only eligible to join the PSSap scheme.

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.  The liability is reported by the Department of Finance and Deregulation as an administered item.

The Department makes employer contributions to the CSS and PSS employee superannuation scheme at rates determined by an actuary to be sufficient to meet the cost to the Government of the superannuation entitlements of the Department’s employees. The Department 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 at year end.

1.10   Leases

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

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

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

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

1.11   Borrowing costs

All borrowing costs are expensed as incurred. 

1.12   Cash

Cash and cash equivalents includes notes and coins held and any deposits in bank accounts with a bank or financial institution. Cash is recognised at its nominal amount.

1.13   Financial assets

The Department classifies its financial assets in the following categories: loans and receivables. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. 

Financial assets are recognised and derecognised at 'trade date'.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset, or, where appropriate, a shorter period.

Income is recognised on an effective interest rate basis except for financial assets 'at fair value through profit or loss'.

Loans and receivables

Trade receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as 'loans and receivables'. They are included in current assets, except for maturities greater than 12 months after the Balance Sheet date, which are classified as non current assets. Loans and receivables are measured at amortised cost using the effective interest method less impairment. Interest is recognised by applying the effective interest rate.

Impairment of financial assets

Financial assets are assessed for impairment at each balance date.

Financial assets held at amortised cost - if there is objective evidence that an impairment loss has been incurred for loans and receivables held at amortised cost, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the asset's original effective interest rate. The carrying amount is reduced by way of an allowance account. The loss is recognised in the Income Statement.

1.14   Financial liabilities

Financial liabilities are classified as either financial liabilities 'at fair value through profit or loss' or other financial liabilities.

Financial liabilities are recognised and derecognised upon 'trade date'.

Other financial liabilities

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

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments throughout the expected life of the financial liability, or where appropriate, a shorter period.

Supplier and other payables

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

1.15   Contingent assets and contingent liabilities

Contingent assets and contingent liabilities are not recognised in the Balance Sheet but are reported in the relevant schedules and notes.  They may arise from uncertainty as to the existence of an asset or liability, or represent an existing asset or liability in respect of which settlement is not probable or the amount cannot be reliably measured.  Remote contingencies are part of this disclosure.  Contingent assets are disclosed when settlement is probable, and contingent liabilities are recognised when settlement is greater than remote.

1.16  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 revenues 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 agency’s accounts immediately prior to the restructuring.

1.17   Property, plant and equipment 

Asset recognition threshold

Purchases of property, plant and equipment are recognised initially at cost in the Balance Sheet, 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 'makegood' cost of dismantling and removing the item and restoring the site on which it is located.  This is particularly relevant in property leases taken up by the Department where there exists an obligation to restore the property to its original condition.  These costs are included in the value of leasehold improvements with a corresponding provision for the ‘makegood’ taken up.

Revaluations

Fair values for each class of asset are determined as shown below:

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

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

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

Depreciation

Depreciable property, plant and equipment assets are written-off to their estimated residual values over their estimated useful lives to the Department using, in all cases, the straight-line method of depreciation. Leasehold improvements are depreciated on a straight-line basis over the lesser of the estimated useful life of the improvements or the unexpired period of the lease. The library assets which have been recognised as heritage assets are not depreciated, and all other library acquisitions are expensed in the year of acquisition.

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. Residual values are re-estimated for a change in price only when assets are revalued.

Depreciation rates applying to each class of depreciable Departmental asset are based on the following useful lives:

Depreciation rates applying to each class of depreciable Administered asset are based on the following useful lives:

Impairment

All assets were assessed for impairment at 30 June 2009.  Where indications of impairment exist, the asset’s recoverable amount is estimated and an impairment adjustment made if the asset’s recoverable amount is less than its carrying amount.

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

1.18   Intangibles

The Department's intangibles comprise internally developed software and purchased software for internal use.  These assets are carried at cost and are amortised on a straight-line basis over its anticipated useful life.

The useful life of Departmental intangibles is 3 to 5 years (2007-08: 3 to 5 years).

In addition to internally developed and purchased software the Administered intangibles also include the phosphate mining lease.  The useful life of Administered intangibles is 3 to 15 years (2007-08: 3 to 15 years).

1.19  Inventories

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

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

1.20   Taxation

The Department 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 where the amount of GST incurred is not recoverable from the Australian Taxation Office, and
• except for receivables and payables.

1.21   Reporting of Administered Activities

Administered revenues, expenses, assets, liabilities and cash flows are disclosed in the Schedule of Administered Items and related notes.

Except where otherwise stated below, 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.

Administered cash transfers to and from the Official Public Account

Revenue collected by the Department for use by the Government rather than the Department is Administered Revenue.  Collections are transferred to the Official Public Account (OPA) maintained by the Department of Finance and Deregulation.  Conversely, cash is drawn from the OPA to make payments under Parliamentary appropriation on behalf of Government.  These transfers to and from the OPA are adjustments to the administered cash held by the Department on behalf of the Government and reported as such in the Statement of Cash Flows in the Schedule of Administered Items and in Note 20: Administered Reconciliation Table. The schedule of administered items largely reflects the Government’s transactions, through the Department, with parties outside the Government.

Revenue

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

Revenue from levies, fees and fines is recognised when it is probable that the economic benefit comprising the consideration will flow to the Australian Government.

Dividend revenue represents dividends received from entities, which mainly relate to administered investments of the Department and is recognised when the dividend has been declared and the right to receive the dividend has been established.

Competitive neutrality

The Australian Government Solicitor (AGS) is a portfolio related entity and operates on a for profit basis.  As an agency within the Australian Government it is not subject to taxation other than GST and FBT.  However, under competitive neutrality arrangements, the AGS is required to make payroll tax, income tax, and practicing certificates equivalent payments to the Government.

Loans and receivables

Where receivables are not subject to concessional treatment, they are carried at amortised cost using the effective interest method. Gains and losses due to impairment, derecognition and amortisation are recognised through surplus and deficit.

Concessional loans are initially recognised at their fair value. If the rate of interest charged is lower than the government bond rate (for government/public sector loans) or the counterparty's borrowing rate (for non government loans) the difference between the amortised cost and the fair value of the loan is treated as an expense. 

Administered investments

Administered investments in controlled entities are not consolidated because their consolidation is relevant only at the whole of Government level.

Administered investments other than those held for sale are measured at their fair value as at 30 June 2009.  Fair value has been taken to be the net assets of the entities as at balance date.

Personal benefits

Personal benefits are measured at the present value of the estimated future cash outflows to be made in respect of service provided up to the reporting date.  The current year figure is calculated with reference to AASB 119. 

Grants and subsidies

The Department administers a number of grant and subsidy schemes on behalf of the Government.

Grant and subsidy liabilities are recognised to the extent that (i) the services required to be performed by the grantee have been performed or (ii) the grant eligibility criteria have been satisfied, but payments due have not been made.  A commitment is recorded when the Government enters into an agreement to make these grants but services have not been performed or criteria satisfied.

Payments to CAC Act bodies

From 2008-09, payments to CAC Act bodies from amounts appropriated for that purpose are classified as administered expenses of the relevant portfolio department.  The appropriation to the department is disclosed in Tables A of Note 24.

Note 2: Events after the Balance Sheet Date

There are no known events after the Balance Sheet date which will have a material impact on the Department.

Note 3: Income

Note 4: Expenses

Note 5: Financial Assets

Reconciliation of the allowance impairment:

Note 6: Non-Financial Assets

Property, plant and equipment under finance leases are subject to revaluation.  The carrying amount is included in the valuation figures above and is separately disclosed in Table A.

All revaluations were undertaken in accordance with the revaluation policy stated at Note 1.17.  In 2008-09, revaluations were undertaken by the Australian Valuation Office.

No indicators of impairment were found for property, plant and equipment.

No indicators of impairment were found for intangible assets.

Note 7: Payables

¹ See also Note 1.5 changes in accounting policy and correction of errors.

All other payables are current liabilities.

Note 8: Interest Bearing Liabilities

Note 9: Provisions

Note 10: Restructuring

Note 10A: Departmental restructuring

As a result of a restructuring of administrative arrangements during the 2007-08 financial year, the Department assumed responsibility for the following functions:

• Administration of the National Classification Scheme
• Service to territories and advice on their administration, and
• Natural disaster relief and mitigation

As a result of a restructuring of administrative arrangements, the Department relinquished responsibility for the following functions:

• Privacy and freedom of information
• Australian Commission for Law Enforcement Integrity

In respect of functions assumed, the net book values of assets and liabilities transferred to the Agency for no consideration and recognised as at the date of transfer were:

Note 10B: Administered restructuring

As a result of a restructuring of administrative arrangements during the 2007-08 financial year, the Department assumed responsibility for the following functions:

• Administration of the National Classification Scheme
• Service to territories and advice on their administration, and
• Natural disaster relief and mitigation

In respect of functions assumed, the net book values of assets and liabilities transferred to the Agency for no consideration and recognised as at the date of transfer were:

Note 11: Cash Flow Reconciliation

Note 12: Contingent Liabilities and Assets

Unquantifiable Contingencies

At 30 June 2009, the Department was involved in a number of legal matters for which it is not possible to estimate the amounts of any eventual payments that may be required in relation to these claims.

Note 13: Senior Executive Remuneration

Note 14: Remuneration of Auditors

Note 15: Financial Instruments

Note 15D: Credit risk

The Department is exposed to minimal credit risk as loans and receivables are cash equivalents and trade receivables. The maximum exposure to credit risk is the risk that arises from potential default of a debtor. This amount is equal to the total amount of receivables $5,094,216 (2008: $6,923,433). The Department has assessed the risk of default on payment and has allocated $117,522 (2008: $332,809) to an impairment allowance account.  This amount has been determined following an assessment of invoices greater than 60 days past due.

The Department has policies and procedures that guide employees on debt recovery techniques.

The following table illustrates the Departments gross exposure to credit risk. The Department holds no collateral to mitigate credit risk.

Credit quality of financial instruments not past due or individually determined as impaired

Ageing of financial assets that are past due but not impaired for 2009:

Ageing of financial assets that are past due but not impaired for 2008:

The following list of assets have been individually assessed as impaired

Trade receivables have been individually assessed for impairment by departmental officers. Recovery of the debt has been considered based on communication with the debtor, and if a debt is determined to be unrecoverable, an allowance for impairment is recognised.

Note 15E: Liquidity risk

The Department's financial liabilities are payables, finance leases and other interest bearing liabilities. The exposure to liquidity risk is based on the notion that the Department will encounter difficulty in meeting its obligations associated with financial liabilities. This is highly unlikely due to appropriation funding and other funding mechanisms available to the Department (e.g. Advance to the Finance Minister) and internal policies and procedures in place to ensure there are appropriate resources to meet financial obligations as and when they fall due.  In addition, the Department has no past history of default.

The following tables illustrates the maturities for financial liabilities:

Note 15F: Market risk

The Department holds basic financial instruments that do not expose it to market risks. The Department is not exposed to 'currency risk' or 'other price risk'.

Interest rate risk

The only interest-bearing items on the Balance Sheet are finance leases and other interest bearing liabilities. All bear interest at a fixed interest rate and will not fluctuate due to changes in the market interest rate.

Note 16: Income Administered on Behalf of Government

Note 17: Expenses Administered on Behalf of Government

Note 18: Assets Administered on Behalf of Government

The credit terms of goods and services receivable are net 30 days (2008: 30 days).

Loans are made to State and Territory Governments for periods up to 100 years. No security is required. Principal will be repaid in full by maturity. Interest rates are either fixed or variable. Interest payments are made annually.

¹ See also Note 1.5 changes in accounting policy and correction of errors.

Reconciliation of the allowance for impairment:

Movements in relation to 2009 $68,480 (2008: $139,716)

Table A – Reconciliation of the opening and closing balances of infrastructure, plant and equipment (2008-09)

Table A – Reconciliation of the opening and closing balances of infrastructure, plant and equipment (2007-08)

Table B: Reconciliation of the opening and closing balances of intangibles (2008-09)

Table B: Reconciliation of the opening and closing balances of intangibles (2007-08)

Note 19: Liabilities administered on behalf of Government

The demographic assumptions used as at 30 June 2008 are those used for the preparation of the Long Term Cost Report for the Judges' Pension Scheme as at 30 June 2005.  The demographic assumptions used as at 30 June 2009 are those used for the preparation of the Long Term Cost Report for the Judges' Pension Scheme as at 30 June 2008.

Benefits payable (including payments of surcharge debt) under the Judges' Pensions Act 1968 and the Superannuation (Productivity Benefit) Act 1988 are paid from Consolidated Revenue on an emerging (or pay as you go) basis. Thus, contributions made equal benefits paid for the Judges' Pension Scheme.

The expected employer contributions in respect of 2009-10 are $31,000,000.

The cumulative actuarial losses and gains recognised in equity are as follows:

The Federal Magistrates Act 1999 was amended so as to allow for the provision of lump sum death benefits and invalidity pensions to Federal Magistrates with effect from September 2007.  The scheme is unfunded and financed solely by the employer (the Australian Government).

Benefits payable are paid from Consolidated Revenue on an emerging (or pay as go) basis.  Thus contributions made equal benefits paid.

The expected employer contributions in respect of 2009-10 are $0 which is the expected amount of benefit payments.

The cumulative actuarial losses and gains recognised in equity are as follows:

Note 20: Administered Reconciliation Table

Note 21: Administered Contingent Assets and Liabilities

Unquantifiable Administered Contingencies

Administered contingencies that are not remote and can be reliably measured are disclosed in the Schedule of Administered Items as quantifiable administered contingencies.

The Department does not have any unquantifiable administered contingencies.

Note 22: Administered Investments

The Australian Government owns 100% of the following entities:

• Australian Institute of Criminology - s5(2)(a) of the Criminology Research Act 1971
• Criminology Research Council - s34(2)(a) of the Criminology Research Act 1971
• Australian Law Reform Commission - s5(2)(a) of the Australian Law Reform Commission Act 1996
• High Court of Australia - s17 of the High Court of Australia Act 1996
• Australian Government Solicitor - s55M of the Judiciary Act 1903