The budgeted agency 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 (refer to Tables 5.1 to 5.9).
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 (incorporating the Australian Equivalents to International Financial Reporting Standards (AEIFRS)) 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 2006-07 and for the remainder of the forward estimates.
Departmental appropriations for 2006-07 is $265.2 million, which is an increase of $38.4 million on the amount recognised in 2005-06. The rise in appropriation is attributed to the Governments decision to fund ASIC to sustain its operational capability and to broaden its surveillance capability, to fund enhanced information technology security and risk management initiatives and to fund a ‘reducing red tape’ initiative that will provide for the electronic registration of charges. Included in the total departmental appropriation is $30.0 million that has been set aside in a special account to fund investigation and litigation costs relating to exceptional matters of significant public interest (also refer Table 2.6). ASIC will also generate $8.5 million in receipts from independent sources.
Total expenses including borrowing costs for 2006-07 are estimated to be $273.7 million, an increase of $38.2 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 3.2.
Budgeted total departmental expenses
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.
ASIC’s budgeted equity (or net asset position) for 2006-07 is expected to be $9.8 million. This includes additional capital funding of $6.5 million associated with the following measures: Broadening ASIC's surveillance capability; Enhancement of information technology security and risk management; and Electronic registration of charges.
ASIC's cash includes an amount of $11.3 million which is a quarantined equity injection received in 2004-05. ASIC is required to keep a minimum cash level of $11.3 million. Accounts receivable is expected to be $2.7 million.
A formal 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, which is also required by Australian Equivalents to International Financial Reporting Standards (AEIFRS). Between formal valuations, plant and equipment assets are reviewed by the Australian Valuation Office to ensure that reported amounts are not materially different to their fair values.
Budgeted total departmental assets
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. Other interest bearing liabilities consists of amortised property lease incentives, which decreases gradually over the expected life of the related property leases.
Provisions and payables
The principal item under this heading is employee leave provisions and accruals which include annual and long service leave. Other provisions and payables consist of a make-good provision for leased premises, which decreases gradually over the expected life of the related property leases.
Represents amounts owing to suppliers remaining unpaid at 30 June each year. The increase of $1.9 million over 2005-06 is in line with the increase in operating expenditure.
Budgeted total departmental liabilities
5.2 Budgeted financial statements tables
Table 5.1: Budgeted departmental income statement
for the period ended 30 June
Table 5.2: Budgeted departmental balance sheet
as at 30 June
Table 5.3: Budgeted departmental statement of cash flows
for the period ended 30 June
Table 5.4: Departmental statement of changes in equity — summary of movement (Budget 2006-07)
Table 5.5: Departmental capital budget statement
Table 5.6: Departmental property, plant, equipment and intangibles - summary of movement (Budget year 2006-07)
Table 5.7: Schedule of budgeted income and expenses administered on behalf of government for the period ended 30 June
Table 5.8: Schedule of budgeted assets and liabilities administered on behalf of government as at 30 June
Table 5.9: Schedule of budgeted administered cash flows
for the period ended 30 June
Table 5.10: Schedule of administered capital budget
ASIC does not have any administered capital.
Table 5.11: Schedule of administered property, plant, equipment and intangibles — summary of movement (Budget year 2006-07)
ASIC does not have any administered property, plant, equipment and intangibles.
5.3 Notes to the financial statements
Basis of accounting
The financial statements have been prepared on an accrual basis and in accordance with 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.
ASIC has adopted fair value as a basis for valuing plant and equipment and leasehold improvements, which occurs on a three yearly revaluation cycle. Intangible assets include capitalised software and work in progress and are shown at cost.
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.
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 lower of the fair value or the present value of minimum lease payments at the inception of the lease, and a liability is 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 leasehold improvements, plant and equipment assets are written down to their estimated residual values over their estimated useful lives to ASIC.
Plant and equipment
Computer equipment is depreciated using the declining-balance method whilst, for all other plant and equipment, the straight-line method of depreciation is applied. Depreciation of computer equipment was changed to the declining balance method for the first time in 2004-05. This change was made as the resultant depreciation pattern from the declining balance method more accurately reflects the reduction in fair value over the life of these assets.
Leasehold improvements are amortised on a straight-line basis over the lesser of the estimated useful life of the improvements or the unexpired period of the lease.
Depreciation rates (useful lives) and methods are reviewed at each reporting date and necessary adjustments are recognised in the current, or current and future reporting periods, as appropriate.
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.
Provisions and payables
Provisions and payables represent liabilities for miscellaneous accruals and employee benefits, including accrued salary and leave entitlements and provisions for making-good leased premises. No provision for sick leave is required as all sick leave is non-vesting.
Schedule of budgeted revenues and expenses administered on behalf of Government
Non-taxation revenues are predominately comprised of revenues from government, required for refunds paid under the Banking Act 1959 and the Life Insurance Act 1995, and Corporations Act fees and charges.
Write down and impairment of assets
Write down and impairment of assets represents waivers and write-offs of Corporations Law fees.
Schedule of budgeted assets and liabilities administered on behalf of Government
The financial assets include Corporations Law debt invoiced and still outstanding at year-end.
Schedule of budgeted administered cash flows
All cash collected by ASIC for Corporations Law revenue, is transferred to the Official Public Account (OPA) at the close of business each day. Cash collected for Banking Act unclaimed monies and Life Insurance Act unclaimed monies is transferred to the OPA when received.