Australian Government, 2005–06 Budget

Section 5: Budgeted financial statements

The budgeted agency and financial statements and related notes for the Australian Securities and Investments Commission (ASIC) are presented in this section. The financial statements should be read in conjunction with the accompanying notes. The Budget estimate and three forward years comprise the following statements.

The budgeted financial statements contain estimates prepared in accordance with the requirements of the Australian Government’s financial budgeting and reporting framework, including the principles of Australian Accounting Standards and Statements of Accounting Concepts, as well as specific guidelines issued by the Department of Finance and Administration.

5.1: Analysis of budgeted financial statements

Budgeted departmental statement of financial performance

ASIC is budgeting for a break-even operating result for 2004-05 and for the remainder of the forward estimates.

Departmental appropriation for 2005-06 is $213.7 million, which is an increase of $7.8 million on the amount recognised in 2004-05. The rise in appropriation is attributed to the Governments decision to fund ASIC for its additional responsibilities relating to the implementation, consumer protection and enforcement of the Choice of Superannuation Fund, to fund ASIC’s on-going enforcement actions, and also to fund the US — Australian audit regulation program. ASIC will also generate $8.4 million in receipts from independent sources (i.e. sale of services and interest).

Total expenses including borrowing costs for 2005-06 are estimated to be $222.0 million, an increase of $7.9 million over the prior financial year. The expenditure will be used to fund activities that contribute towards achieving the objective outputs 1.1.1 to 1.1.4 appearing in Table 3.1.

Budgeted total departmental expenses 2005-06

Budgeted total departmental expenses 2005-06

Budgeted departmental statement of financial position

This statement shows the financial position of ASIC. It helps decision-makers to track the management of ASIC’s assets and liabilities, and also shows the Government’s remaining equity.

Equity

ASIC’s budgeted equity (or net asset position) for 2005-06 is expected to be $7.2 million. This includes additional capital funding of $1.5 million for specific enforcement matters. The increase in contributed equity of $11.3 million in 2004-05 relates to an injection of capital to address cumulative operating losses, of prior years.

Non-Financial Assets

A revaluation of plant and equipment to fair value was undertaken in 2004-05 in accordance with ASIC’s policy to revalue all classes of non-financial assets every three years, and as required by Australian Equivalents to International Financial Reporting Standards (AEIFRS). The effect of this revaluation was a write-down in the value of assets of $1.3 million (refer to Table 5.1).

Budgeted total departmental assets 2005-06

Budgeted total departmental assets 2005-06

Liabilities – Debt

The principal item under this heading is the estimated amount owing by ASIC in respect of finance leases for computer equipment and peripherals. ASIC is currently negotiating the terms of a new agreement relating to the provision of a lease financing facility. The forward estimates will be updated in the 2005-06 additional estimates once the agreement has been concluded.

Provisions and payables

The principal item under this heading is employee leave provisions and accruals. The amount is expected to remain constant as a percentage of total salaries over the forward estimates as the provisions of the Certified Agreement take effect.

Supplier payables

Represents amounts owing to suppliers remaining unpaid at 30 June each year. The increase of $2.4 million over 2004-05 is in line with the increase in operating expenditure.

Budgeted total departmental liabilities 2005-06

Budgeted total departmental liabilities 2005-06

5.2: Budgeted financial statements tables

Table 5.1: Budgeted departmental statement of financial performance
for the period ended 30 June

Table 5.1:  Budgeted departmental statement of financial performance for the period ended 30 June

1 Adoption of Australian Equivalents to International Financial Reporting Standards (AEIFRS) fair value revaluation of plant and equipment. On 1 July 2004, ASIC revalued plant and equipment assets on the basis of fair value, which resulted in a reduction in the written down value of these assets amounting to $1.3 million.

Table 5.2: Budgeted departmental statement of financial position
as at 30 June

Table 5.2:  Budgeted departmental statement of financial position as at 30 June

* ‘Equity’ is the residual interest in assets after deduction of liabilities.

Table 5.3: Budgeted departmental statement of cash flows
for the period ended 30 June

Table 5.3:  Budgeted departmental statement of cash flows for the period ended 30 June

Table 5.4: Departmental capital budget statement

Table 5.4:  Departmental capital budget statement

Table 5.5: Departmental property, plant, equipment and intangibles — summary of movement (Budget year 2005‑06)

Table 5.5:  Departmental property, plant, equipment and intangibles — summary of movement (Budget year 2005‑06)

Table 5.6: Schedule of budgeted revenues and expenses administered on behalf of Government for the period ended 30 June

Table 5.6:  Schedule of budgeted revenues and expenses administered on behalf of Government for the period ended 30 June

Table 5.7: Schedule of budgeted assets and liabilities administered on behalf of Government as at 30 June

Table 5.7:  Schedule of budgeted assets and liabilities administered on behalf of Government as at 30 June

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Table 5.8: Schedule of budgeted administered cash flows
for the period ended 30 June

Table 5.8:  Schedule of budgeted administered cash flows for the period ended 30 June

Table 5.9: Schedule of administered capital budget

This table is not applicable to ASIC.

Table 5.10: Schedule of property, plant, equipment and intangibles — summary of movement (Budget Year 2005‑06)

This table is not applicable to ASIC.

5.3: Notes to the financial statements

Basis of accounting

The financial statements have been prepared on an accrual basis and in accordance with the historical cost convention.

Budgeted departmental financial statements

Under the Australian Government’s accrual budgeting framework, and consistent with Australian Accounting Standards, transactions that agencies control (departmental transactions) are separately budgeted for and reported on from transactions that agencies do not have control over (administered transactions). This ensures that agencies are only held fully accountable for the transactions over which they have control.

Departmental items are those assets, liabilities, revenues and expenses in relation to an agency or authority that are controlled by the agency. Departmental expenses include employee and supplier expenses and other administrative costs, which are incurred by the agency in providing its goods and services.

Administered items are revenues, expenses, assets and liabilities that are managed by an agency or authority on behalf of the Australian Government according to set government directions. Administered expenses and administered revenues include taxes, fees, fines and expenses that have been earmarked for a specific purpose by government.

Appropriations in the accrual budgeting framework

Under the Australian Government’s accrual budgeting framework, separate annual appropriations are provided for:

  • departmental price of outputs appropriations representing the Australian Government’s purchase of outputs from agencies;
  • departmental capital appropriations for investments by the Australian Government for either additional equity or loans in agencies;
  • administered expense appropriations for the estimated administered expenses relating to an existing outcome or a new outcome; and
  • administered capital appropriations for increases in administered equity through funding non-expense administered payments.
Asset valuation

From 1 July 2004, Australian Government agencies and authorities are required to use either the cost basis or the fair value basis to value infrastructure, plant and equipment and leasehold improvements on a three yearly revaluation cycle. ASIC has adopted fair value as a basis for valuing its non-current assets.

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.

Leases

A distinction is made between finance leases, which effectively transfer from the lessor to the lessee substantially all the risks and benefits incidental to ownership of leased non-current assets, and operating leases under which 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 the present value of minimum lease payments at the inception of the lease and a liability recognised for the same amount. 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 charged to the statement of financial performance on a basis that is representative of the pattern of benefits derived from the lease assets.

Depreciation and amortisation

Depreciable plant and equipment and leased information technology assets are written off to their estimated residual values over their estimated useful lives using in all cases the straight line method of depreciation. Leasehold improvements are amortised on a straight line basis over the lesser of the estimated life of the improvements or the unexpired period of the lease.

Depreciation/amortisation rates (useful lives) are reviewed at each balance date and necessary adjustments are recognised. ASIC is reviewing the appropriateness in using the straight line method of depreciation for computer equipment.

Receivables

A provision is raised for any doubtful debts based on a review of the collectability of all outstanding accounts as at year end.

Bad debts are written off during the year in which they are identified.


Miscellaneous