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Note 3. Departmental financial position

This section analyses the APSC’s 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, Note 5.

Note 3.1: Financial assets

Note 3.1a: Trade and other receivables
  2017
$’000
2016
$’000
Trade and other receivables
Goods and services 1,149 1,447
Appropriation receivable 20,372 22,980
GST receivable from the Australian Taxation Office 455 405
Total trade and other receivables (gross) 21,976 24,832
Less impairment allowance—Goods and services (1) (1)
Total trade and other receivables (net) 21,975 24,831

Credit terms for goods and services are within 30 days (2016: 30 days).

Accounting policy

Trade receivables are classified as ‘loans and receivables’. Loans and receivables are measured at face value less impairment.

Reconciliation of impairment allowance
  2017
$’000
2016
$’000
Opening balance (1) (6)
Amounts written off 1 -
Amounts recovered and reversed - 6
(Increase)/decrease recognised in net cost of services (1) (1)
Closing balance (1) (1)

Accounting policy

Trade receivables are assessed for impairment at the end of each reporting period.

Note 3.2: Non-financial assets

Reconciliation of the opening and closing balances of property, plant and equipment and intangibles for 2017

Note 3.2a: Reconciliation of the opening and closing balances of property, plant, equipment and intangibles
2017 Buildings—Leasehold improvements
$’000
Plant and equipment
$’000
Intangibles—Computer software
$’000
Intangibles
—Intellectual property
$’000
Total
$’000
As at 1 July 2016
Gross book value 1,949 1,584 3,239 801 7,573
Accumulated depreciation and impairment - (650) (2,170) (801) (3,621)
Total as at 1 July 2016 1,949 934 1,069 - 3,952
Additions—by purchase 494 69 611 - 1,174
Revaluations and impairments recognised in other comprehensive income (936) (201) - - (1,137)
Revaluations and impairments recognised in net cost of services (253) - - - (253)
Depreciation (431) (336) (462) - (1,229)
Disposals - (1) - - (1)
Total as at 30 June 2017 823 465 1,218 - 2,506
Total as at 30 June 2017 represented by
Gross book value 2,442 1,622 3,850 707 8,621
Accumulated depreciation and impairment (1,619) (1,157) (2,632) (707) (6,115)
Total as at 30 June 2017 823 465 1,218 - 2,506

Property, plant, equipment and intangibles were assessed for impairment as at 30 June 2017. An impairment loss of $1,390,000 was identified (2016: nil). $1,136,000 of this impairment was charged as a decrease to reserves, as it reverses a previous revaluation increment, with the remainder recognised as an impairment expense. $274,000 of property, plant, equipment and intangibles are expected to be disposed of within the next 12 months (2016: nil).

Revaluation of non-financial assets

Revaluations are conducted in accordance with the revaluation policy contained in this note. No revaluation was performed during the 2016-17 financial year (2016: Australian Valuation Solutions conducted a revaluation of leasehold improvements). There was no revaluation increment (2016: increment of $570,000 leasehold improvements). All increments and decrements, to the extent that they reverse a previous increment, are transferred to the asset revaluation surplus by asset class and included in the equity section of the statement of financial position. No decrements due to revaluation were expensed in 2017 (2016: nil).

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

There are two significant contractual commitments for the acquisition of property, plant and equipment with a total future value $5,002,000 (2016: no significant contractual commitments).

Accounting policy

Acquisition of assets

Assets are recorded at cost on acquisition except as stated below. The cost of acquisition includes the fair value of assets transferred in exchange and liabilities undertaken. Financial assets are initially measured at their fair value.

Assets acquired at no cost, or for nominal consideration, are initially recognised as assets and income at their fair value at the date of acquisition, unless acquired as a consequence of restructuring of administrative arrangements.

Asset recognition threshold

Purchases of property, plant and equipment are recognised initially at cost in the statement of financial position, except for purchases of property plant and equipment costing less than $2,000, or leasehold improvements costing less than $60,000, 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 the provision for restoration obligations in property leases taken up by the APSC where there exists an obligation to restore the property to its original condition. These costs are included in the value of the APSC’s leasehold improvements with a corresponding provision for restoration obligations recognised.

Revaluations

Following initial recognition at cost, property plant and equipment are carried at fair value less subsequent accumulated depreciation and accumulated impairment losses. Valuations are conducted with sufficient frequency to ensure that the carrying amounts of assets do not materially differ 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.

Revaluation adjustments are made on a class basis. Any revaluation increment is credited to equity under the heading of asset revaluation surplus except to the extent that it reverses a previous revaluation decrement of the same asset class that was previously recognised in the surplus or deficit. Revaluation decrements for a class of assets are recognised directly in the surplus or deficit 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 APSC using, in all cases, the straight-line method of depreciation.

Depreciation rates (useful lives), residual values and methods are reviewed at each reporting date.

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

Asset class 2017 2016
Leasehold improvements Expected lease term Lease term
Property, plant and equipment 1 to 13 years 1 to 13 years

Impairment

All assets were assessed for impairment at 30 June 2017. 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.

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

The APSC’s intangibles comprise intellectual property, purchased software and internally developed software for internal use. These assets are carried at cost less accumulated amortisation and accumulated impairment losses where the value of the asset exceeds $2,000 for purchased software and $60,000 for internally developed software and intellectual property.

Intangibles are amortised on a straight-line basis over their anticipated useful life. The useful lives of the APSC’s intangibles are between 2 to 10 years (2016: 2 to 10 years).

All intangible assets were assessed for impairment as at 30 June 2017.

Note 3.2b: Prepayments paid
  2017
$’000
2016
$’000
Prepayments paid
Suppliers 560 565
Total prepayments paid 560 565

No indicators of impairment were found for prepayments paid.

Note 3.3: Payables

Note 3.3a: Suppliers
  2017
$’000
2016
$’000
Trade creditors and accruals 2,441 3,808
Operating lease rentals 190 1,696
Total suppliers 2,631 5,504
Note 3.3b: Prepayments received
  2017
$’000
2016
$’000
Rendering of services 4,586 4,924
Total prepayments received 4,586 4,924
Note 3.3c: Lease incentives
  2017
$’000
2016
$’000
Operating lease rentals 28 600
Total lease incentives 28 600
Note 3.3d: Other payables
  2017
$’000
2016
$’000
Wages and salaries 153 79
Superannuation 26 14
Separations and redundancies 109 575
Other 80 90
Total other payables 368 758

Accounting policy

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). Supplier and other payables are recognised and derecognised upon trade date.

Operating lease incentives taking the form of lessor contributions and rent holidays are recognised as liabilities. These liabilities are reduced by allocating lease payments between rental expense and reduction of the liability.

The wages and salaries payable and superannuation payable represent outstanding contributions for the final fortnight of the financial year.

The APSC recognises a payable for separation and redundancy benefit payments when it has developed a detailed formal plan for the terminations and has informed those employees affected that it will carry out the terminations.

Note 3.4: Other provisions

Note 3.4a: Provision for restoration obligations
  2017
$’000
2016
$’000
As at 1 July 280 401
Amounts reversed - (131)
Unwinding of discount or change in discount rate 5 10
Total as at 30 June 285 280

The APSC currently has two (2016: two) leasing agreements which have provisions requiring the APSC to restore the premises to their original condition at the conclusion of the lease. The APSC has made provisions to reflect the present value of these obligations.

There was no revaluation of the restoration obligations (2015-16: restoration obligations were decreased by $125,000, with this change taken to the asset revaluation reserve).