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  • 1. Health Services Annual Reporting Guidelines for 2008-2009 Under Financial Management Act 1994 Department of Human Services
  • 2. Table of Contents Table of Contents................................................................................................i Contents................................................................................................i Introduction.......................................................................................................1 Introduction.......................................................................................................1 Recent Relevant Professional Developments...........................................................3 Developments...........................................................3 Financial Reporting Directions (FRDs)....................................................................3 Summary of New and Revised Accounting Pronouncements......................................4 AASB Accounting Standards.................................................................................4 Standards.................................................................................4 Beginning on or after..........................................................................................4 after..........................................................................................4 Exposure Drafts.................................................................................................5 Drafts.................................................................................................5 Yearly Timetable................................................................................................6 Timetable................................................................................................6 Financial Statements ..........................................................................................6 Annual Reports..................................................................................................7 Printing and Publication of Annual Report to be tabled in Parliament .........................8 .........................8 Report of Operations.........................................................................................10 Operations.........................................................................................10 Responsible Bodies Declaration...........................................................................10 Reporting Comments.........................................................................................11 Additional information (FRD 22B Appendix)..........................................................13 Other Information.............................................................................................14 Key Financial and Service Performance Reporting..................................................15 Part A.............................................................................................................15 Part B.............................................................................................................16 Part B.............................................................................................................18 Part C.............................................................................................................19 Part C.............................................................................................................20 Attestation on Data Accuracy.............................................................................22 Classifying Transactions to the Health Service Agreement (HSA) or Hospital and Community Initiatives (H&CI)......................................................................24 General Issues.................................................................................................25 Attestation on Compliance with Australian/New Zealand Risk Management Standard. 26 Disclosure Index...............................................................................................27 Financial Statements and Explanatory Notes.........................................................29 Introduction.....................................................................................................29 Board member’s, accountable officer’s and chief finance & accounting officer’s declaration...............................................................................................31 Auditor-General’s Report...................................................................................32 i
  • 3. Auditor-General’s Report...................................................................................33 Page 2............................................................................................................33 Operating Statement.........................................................................................33 Balance Sheet..................................................................................................35 OLE_LINK........................................................................................................39 Notes to the Financial Statements ......................................................................41 ......................................................................41 ii
  • 4. Introduction These guidelines are provided to assist health services in the presentation of their annual report as required under the Financial Management Act 1994 (the Act), section 4.2 of the Standing Directions of the Minister for Finance under the Act and Financial Reporting Directions. The Act and Directions apply to all entities. Each annual report is to be divided into two sections: • Report of operations. • Financial statements including explanatory notes. These guidelines have been developed to illustrate as widely as possible the minimum disclosure requirements for entities. You are expected to use the guideline as a basis for preparing your financial report, subject to each entity’s individual circumstances. These guidelines provide guidance for entities to complete their financial statements, while further information can be found in the following documents: • Financial Management Act 1994. • Standing Directions of the Minister for Finance. • Financial Reporting Directions (FRDs) issued by the Department of Treasury and Finance. • Australian Accounting Standards. • Australian Interpretations. • AIMS guidelines. It is recommended that the reporting process commence in early June 2009 with a mock run using 31 May, 2009 data, incorporating June data in early July in order to meet the 24 July 2009 and 25 August 2009 deadlines for financial statements (Refer to Timetable on page 6). Balance date for entities is 30 June 2009. Submission of a June F1 for 2008-09 is required. The due date for submitting the F1 is 28 July 2009. Health Services will be required to provide an interim financial result prior to this date. Abbreviations in these guidelines refer to Australian Accounting Standards (AAS), AASB Accounting Standards (AASB), the Financial Management Act 1994 (the Act), Financial Reporting Direction (FRD) and Victorian Auditor-General’s Office (VAGO). The guidelines include all requirements that are effective for financial periods beginning on or after 1 July 2008. It is the primary responsibility of the entity’s management and governing board to ensure that these requirements are complied with. As was the case in the previous years there are separate requirements for the State’s Annual Financial Report (AFR) under the Financial Management Act 1994 (Refer s24 of the Act as results from the requirements of AASB 1049 ‘Whole of Government and General Government Sector Financial Reporting’). Each entity needs to complete the prescribed formats in Microsoft 1
  • 5. Excel to meet the AFR reporting requirements. AFR information from entities will be consolidated by the Department of Human Services (The Department or DHS) to produce a Portfolio return to the Department of Treasury and Finance (DTF). DTF will then consolidate the Portfolio returns to produce the State’s AFR report to be tabled in Parliament. Separate AFR instructions will be issued by the Department in June 2009. Queries regarding the contents of these guidelines should be directed to DHS Manager, Financial Accounting at reporting@dhs.vic.gov.au Segment Reporting Health services that provide Commonwealth funded residential aged care services (RACS) are required to comply with AASB 114 Segment Reporting (Refer to s21.26F Para 3e Residential Care Subsidy Amendment Principles 2006 (No. 1)) as a condition of receiving the Commonwealth's Conditional Adjustment Payments. 2
  • 6. Recent Relevant Professional Developments Financial Reporting Directions (FRDs) During 2008-09, the following FRDs were added by DTF that are operative for current and future reporting periods. FRD 103D Non-Current Physical Assets 118 Land Under Roads 119 Contribution by Owners (replacing FRD 2A) 114B/116A Financial Instruments A copy of the FRDs can be obtained from the ‘Budget and Financial Management’ section of DTF’s website address of https://www.bfm2.dtf.vic.gov.au Your user name is: DHS User/BFM Your password is: TNPPVHN1 3
  • 7. Summary of New and Revised Accounting Pronouncements The AASB has issued a number of Exposure Drafts (ED) and Accounting Standards since 30 June 2008. A table listing the new and revised accounting pronouncements are outlined in the tables below. Entities need to be cognisant of changes and where relevant incorporate these issues into the annual reports. Beginning on Australian Interpretations or after Interpretation 15 Agreements for the Construction of Real Estate 1 January 2009 Interpretation 16 Hedges of a Net Investment in a Foreign Operation 1 October 2008 Minimum Funding Requirements and their Interaction Interpretation 17 Distributions of Non-cash Assets to Owners 1 July 2009 Interpretation 18 Transfers of Assets from Customers 1 July 2009 AASB 7 Financial Instruments: Disclosures 1 July 2007 AASB 139 Financial Instruments: Recognition and Measurement 1 July 2007 AASB 1039 Concise Financial Reports 1 January 2009 AASB 1048 Interpretation and Application of Standards 30 September 2008 AASB 2008-5 Amendments to Australian Accounting Standards arising 1 July 2008 from the Annual Improvements Project. [AASB 5, 7, 101, 102, 107, 108, 110, 116, 118, 119, 120, 123, 127, 128, 129, 131, 132, 134, 136, 138, 139, 140, 141, 1023 &1038 AASB 2008-6 Further Amendments to Australian Accounting Standards 1 Jul 2009 arising from the Annual Improvements Project [AASB 1 & 5] AASB 2008-7 Amendments to Australian Accounting Standards – Cost of 1 January 2009 an Investment in a Subsidiary, Jointly Controlled Entity or Associate. [AASB 1, 118, 121, 127 & 136] AASB 2008-8 Amendments to Australian Accounting Standards – Eligible 1 July2009 Hedged Items [AASB 139] AASB 2008-9 Amendments to AASB 1049 for Consistency with AASB 101 1 January 2009 AASB Amendments to Australian Accounting Standard – Business 1 July 2009 2008-11 Combinations Among Not-For-Profit Entities [AASB 3] AASB Amendments to Australian Accounting Standards – 1 July 2008 2008-12 Reclassification of Financial Assets – Effective Date and Transition [AASB 7, 139 & 2008-10] AASB Amendments to Australian Accounting Standards arising 1 July 2009 2008-13 from AASB Interpretation 17 – Distributions of Non-cash Assets to Owners [AASB 5 and AASB 110] AASB 2009-1 Amendments to Australian Accounting Standards – 1 January 2009 Borrowing Costs of Not-for-Profit Public Sector Entities [AASB 1, AASB 111 & AASB 123] 4
  • 8. AASB 2009-2 Amendments to Australian Accounting Standards – 1 January 2009 Improving Disclosures about Financial Instruments [AASB 4, AASB 7, AASB 1023 & AASB 1038] AASB 2009-3 Amendments to Australian Accounting Standards – 1 January 2009 Embedded Derivatives [AASB 139 & Interpretation 9] ED 157 Joint Arrangements ED 158 Proposed Amendments to AASB 139 Financial Instrument Recognition and Measurement – Exposures Qualifying for Hedge Accounting ED 159 Proposed Improvements to Australian Accounting Standards ED 160 Proposed Amendments to AASB 1 First-time Adoption of Australian Equivalents to International Financial Reporting Standards and AASB 127 Consolidated and Separate Financial Statements – Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate ED 161 Proposed Amendments to AASB 2 Share-based Payment and AASB Interpretation 11 AASB 2 – Group and Treasury Share Transactions – Group Cash-Settled Share-based Payment Transactions ED164 An improved Conceptual Framework for Financial Reporting: The Objective of Financial Reporting and Qualitative Characteristics and Constraints of Decision-useful Financial Reporting Information ED165 Improvements to Australian Accounting Standards ED166 Simplifying Earnings per Share: Proposed Amendments to AASB 133 ED167 Discontinued Operations: Proposed Amendments to AASB 5 ED168 Additional Exemptions for First-time Adopters: Proposed Amendments to AASB 1 ED169 Improving Disclosures about Financial Instruments: Proposed Amendments to AASB 7 ED173 Investments in Debt Instruments (Proposed Amendments to AASB 7) ED170 Relationships with the State (Proposed Amendments to AASB 124) ED171 Consolidated Financial Statements ED172 Embedded Derivatives (Proposed Amendments to AASB Interpretation 9 and AASB 139) ED174 Amendments to Australian Accounting Standards to facilitate GAAP/GFS Harmonisation for Entities within the GGS [AASBs 101, 107 and 1052] ED175 Post Implementation Revisions to AASB Interpretation ED176 Proposed amendments to Australian Accounting Standards – Borrowing Costs of Not-For-Profit Public Sector Entities Please refer to AASB website www.aasb.com.au for updates and details to all existing AASB, AASB Interpretations and other accounting pronouncements. 5
  • 9. Yearly Timetable Financial Statements DHS strongly encourages entities to undertake a May hard close that involves the preparation of full financial statements, for audit as at 31 May 2009 with June movements being reviewed by audit for consistency and reasonableness. Entities are also encouraged to bring forward the calculation of certain items into May 2009 provided that there are no material changes expected in June 2009 (this should be discussed with your VAGO representative) i.e. the calculation of LSL Other areas for pre reporting date work to be performed include (and should be discussed with your VAGO representative): • Contingent liabilities, contingent assets and commitments may be compiled as at 31 May provided there are no material changes expected from May to June. • Wage inflation and discount rates for Long Service Leave will be issued by 2 June, thus enabling the calculation of LSL as at 31 May. Entities are requested to discuss their plan for the preparation of their financial statements with their VAGO representative to identify and address any areas which may impede the completion of the AFR templates and annual report by the due dates. It is recommended that entities agree a timetable for the preparation and audit of their financial statements with their VAGO representative. Entities should also advise their VAGO representative of any contentious, unusual or other one-off material transactions (or accounting policies) that they are aware of as soon as possible, in order to ensure early agreement/resolution. The key dates for preparation of the 2008-09 financial statements are as follows: (a) Material health services Material health services are Austin Health, Barwon Health, Alfred Health, Eastern Health, Melbourne Health, Western Health, Southern Health and Royal Children’s Hospital. Deadline Task May onwards Confirm audit process and timeframes with VAGO representative. Note that VAGO is required to audit all controlled entities under the Audit Act 1994. 24 July Provide VAGO representative with complete final draft financial statements that have passed internal quality assurance scrutiny and AFR schedules by no later than this date (and in accordance with the timetable agreed with your VAGO representative). 24 July Submit AFR schedules templates via email to reporting@dhs.vic.gov.au. (refer to separate AFR guidelines). 12 Aug Sign audited financial statements (subject to audit clearance). The Audit Committee and Governing Board should have already adopted the audited financial statements for signing by this date. 6
  • 10. (b) Other health services (non material health services) Deadline* Task May onwards Confirm audit process and timeframes with VAGO representative. Note that VAGO is required to audit all controlled entities under the Audit Act 1994. 24 July Submit AFR schedules templates via email to reporting@dhs.vic.gov.au. (refer to separate AFR guidelines). 25 Aug Provide VAGO representative with complete final draft financial statements that have passed internal quality assurance scrutiny by no later than this date (or earlier in accordance with the timetable agreed with your VAGO representative). 22 Sep Sign audited financial statements (subject to audit clearance). The Audit Committee and Governing Board should have already adopted the audited financial statements for signing by this date. * These deadlines are legislative requirements, which non material health services will need to improve upon to meet the annual report timelines detailed below. Annual Reports Annual reports for 2008-09 will be tabled in Parliament on or before 15 October 2009. Health services are requested to implement a plan to ensure the process of completing for tabling by that date. The key dates for preparation of the annual report are as follows: Deadline* Task From 9 May Start to prepare annual report (excluding financial statements – refer separate timing above for availability). 10 Aug 30 June financial statements submitted to VAGO (non material entities) 12 Aug onwards Advise the relevant DHS Divisional/Regional contact when VAGO signs off on financial statements. 14 Sep Prepare a final printers proof (bromide, PDF etc) of the annual report that contains an exact copy of the audited and approved (by the health service) financial statements, VAGO audit report and submit it to VAGO for final review. Once reviewed, arrange printing of annual report and forward copy of final bromide to the relevant Divisional contact. 14 to 21 Sep Check and forward 15 copies of the complete and final annual reports to Region/Division. 21 Sep Forward 60 hard copies of annual reports (including audited financial statements and VAGO audit report) that requires tabling to Region/Division. If an annual report is to be receipted then no extra copies are required (see page 8 for details). Nov Ensure that annual report is replicated on the health services website and that the VAGO audit report is attached. * These are DHS recommended timelines, if they are not met, the annual report may be tabled/ receipted late in Parliament that is, after 15 October 2009, and will require a Ministerial Briefing specifying the reason(s) why the annual report was late. NOTE: The annual report should be tabled in Parliament before the entities Annual General Meeting and before the Annual Report is made available to the public. Speaker Andrianopoulos made a ruling about the release of an annual report before it was tabled in Parliament. His ruling can be found in Hansard, Vol 452, 22-22 November 2001, pp 1777 and 1873-4. The Speaker ruled that where such a disclosure takes place, it is not a breach of privilege, but is a gross discourtesy to the House. 7
  • 11. Printing and Publication of Annual Report to be tabled in Parliament It is the responsibility of each entity to ensure that the annual report includes the financial report and audit report issued by VAGO. It is recommended that the Report of Operations, the Financial Statements and Explanatory Notes are contained within the same bound publication, and not separate publications. • All details in the published annual report must appear exactly as per the audited financial statements and accompanying notes cleared by VAGO. - No information should be added to or removed from the financial statements, doing so would imply that the amended information has been audited by VAGO. • The format and presentation must be the same as agreed with VAGO. • VAGO’s audit report must be included in the annual report. It is important that this is an exact copy of VAGO’s audit report. Entities are therefore required to ensure that if the financial reports are provided to an external printer that they are proof read to ensure that the completed document agrees with the format, content and presentation as audited by VAGO. Failure to comply with the above will delay the tabling of the entities annual report and may necessitate an addendum, erratum or in extreme cases a reproduction and re-tabling of the entities annual report to Parliament. Any amended financial statements must be submitted to VAGO for audit review. Please note: For ease of reading the financial statements, it is recommended that a font size of no less than 10 be used in the printing of these statements and for ease of storing it is recommended that the size of the annual report should be A4 size. The financial statements must be processed in accordance with the yearly timetable to ensure compliance with the requirements under the Financial Management Act 1994. 21 September 2009 is the deadline for Regions to collect from entities and to submit to the Minister the annual report, that is (report of operations, financial statements and Audit Report). Entities should provide the required number of copies of the annual report as audited by VAGO to regional offices as per below: • Metropolitan Health Services and Denominational Health Services: Director of Finance, 13/50 Lonsdale Street, Melbourne; • Regions: Manager, Cabinet Parliament and Executive Services, 21/50 Lonsdale St, Melbourne The required number of copies each entity is to provide to their division/region is as per below: • Entities that have expenses and obligations (liabilities and commitments) totalling $5 million or more are required to submit 75 copies of their annual report (60 to be tabled in Parliament, and 15 for division/region). 8
  • 12. • Entities that have expenses and obligations (liabilities and commitments) totalling less than $5 million are required to submit 15 copies of their annual report (for the division/region), as no copies are required for receipting in Parliament. (Annual reports are receipted in Parliament by formally presenting a letter to both Houses of Parliament informing that the Minister has received the report of operations and financial statements of the public body) The Minister is required to have the reports tabled/receipted in Parliament on or before 15 October 2009. The Minister must report to Parliament any failure to comply with the time requirements under the Act and reasons for the delay. 9
  • 13. Report of Operations The following guidelines amplify the minimum requirements for the report of operations under the Financial Management Act 1994. Entities are to disclose this information in their annual reports and are to ensure consistency with the financial statements. Consideration should be given to the most effective way of presenting information in the context of additional disclosures made by the entity. A separate ‘statutory' report of operations required by the Act in one part of the annual report is often less effective than inclusion of the required information in the body of the non-financial section of the report. Cross-referencing can be used to ensure compliance with the minimum disclosures in the Act. The report of operations should be presented to VAGO’s representative for comparison with the financial statements. The following are the items requiring disclosure in order to provide readers with background and general information about the entity and their organisation structure. This information is required by the Standing Directions of the Minister for Finance and Financial Reporting Directions (specifically FRD 22B Standard Disclosures in the Report of Operations), and any updates from time to time. Responsible Bodies Declaration In accordance with the Financial Management Act 1994, I am pleased to present the Report of Operations for the <ABC Health Service> for the year ending 30 June 2009. <Signature> <Donald Duck> Board Member Big Town 25 August 2009 Commentary – Responsible Bodies Declaration SD 4.2(j) requires the Report of Operations to be signed and dated by a member of the board of the entity. 10
  • 14. Reporting Comments The following information is required under FRD 22B. Other information is also required under FRD 11 Disclosure of Ex-Gratia Payments, FRD 21A Responsible Person and Executive Officer Disclosures and FRD 25 Victorian Industry Participation Policy Disclosure in the Report of Operations. This information needs to be indexed in the Disclosure Index found at page 27 of these guidelines. (i) Relevant general information should include: (a) the manner in which the entity was established and its relevant Minister; (b) the objectives, functions, powers and duties of the entity. These should be linked to a summary of it activities, programs and achievements for the reporting period; (c) the nature and range of services provided by the entity including the persons or section of the community served by the entity; (d) the administrative structure of the entity including: (i) the names of the members of the governing board, Audit Committee and Chief Executive Officer; (ii) the names of occupants of senior offices and a brief description of the area of responsibility of each office; (iii) a chart setting out the organisational structure of the entity. The organisational chart should be sufficiently detailed to provide users with an understanding of the accountabilities for the entities main activities; (e) Hospitals are currently required to provide a monthly dataset of their current FTE and other payroll information to the Department under the Minimum Employee dataset (MDS). In addition, hospitals are also required to provide a Workforce dataset bi- annually. The latest specification of the MDS is available at http://www.health.vic.gov.au/accounts/payroll.htm#register. Data from the MDS is available to the Minister, to Divisions within the Department and to bodies such as the Australian Institute of Health & Welfare in Canberra and to the State Services Authority. Further, data from the MDS underpins DHS submissions to the Department of Treasury & Finance for funding of Enterprise Bargaining Agreement’s (EBAs) and other industrial matters affecting hospital budgets. To ensure consistency in annual reporting, hospitals are required, as a minimum, to report the following workforce statistics in their Annual Report in the following format: JUNE JUNE Labour Category Current Month FTE YTD FTE Nursing Administration and Clerical Medical Support Hotel and Allied Services Medical Officers Hospital Medical Officers Sessional Clinicians Ancillary Staff (Allied Health) 11
  • 15. The FTE figures required in the table above are those excluding overtime. Do not include contracted staff (eg. Agency nurses, Fee-for-Service Visiting Medical Officers) as they are not regarded as employees. The above data should be consistent with the information provided in the MDS/F1 datasets. (ii) Relevant financial and other information in respect of a financial year should include: (a) a summary of the financial results for the year, from annual financial reports, with comparative results for the preceding four financial years. Previous years data needs to be included on the same basis for comparative purpose. Entities should footnote where changes to audited comparative information has been made to aid comparisons. This summary of the financial results needs to be included in the report of operations and not in the audited financial statements. 2009 2008 2007 2006 2005 $000 $000 $000 $000 $000 Total Revenue Total Expenses Operating Surplus/ (deficit) Retained Surplus/ (Accumulated Deficit) Total Assets Total Liabilities Net Assets Total Equity Other (list) (b) a summary of significant changes in financial position during the year. The report of operations should complement the information presented in the financial statements by providing a discussion and analysis of the entities operating results and financial position. This should include details about any significant factors that affect the entities performance. (c) the operational and budgetary objectives of the entity for the financial year and performance against those objectives including significant activities and achievements during the year; (d) a summary of major changes or factors which have affected the achievement of the operational objectives for the year; (e) events subsequent to balance date which may have a significant effect on the operations of the entity in subsequent years; (f) for consultancies (not contractors) during the year costing in excess of $100,000 (exclusive of GST) per consultancy, a schedule listing the consultants engaged, particulars of the projects involved, the total project fees approved (exclusive of GST), the total fees incurred (exclusive of GST) and future commitments in relation to each consultant; (g) for consultancies during the year costing less than $100,000 (exclusive of GST) per consultancy, the number and total cost (exclusive of GST) of engagements; (h) a statement on occupational health and safety matters, including appropriate performance indicators adopted to monitor such matters and how the entity performs under those indicators; 12
  • 16. (i) a statement on the extent of compliance with the building and maintenance provisions of the Building Act 1993. Refer (Minister for Finance Guideline Building Act 1993/Standards for Publicly Owned Buildings/November, 1994); (j) a summary of the application and operation of the Freedom of Information Act 1982 in relation to the entity; (k) a summary of the application and operation of the Whistleblowers Protection Act 2001 (the Act), including disclosures required by the Act; (l) a disclosure index identifying the extent of compliance with statutory disclosure and other requirements (Refer FRD 10 Disclosure Index. Appendix 1 of FRD 10 contains example disclosures for the financial report); (m) a statement, to the degree applicable, on the extent of progress in implementation and compliance with National Competition Policy, including: (i) the requirements of the Government policy statement, Competitive Neutrality Policy Victoria; and (ii) subsequent reforms; Additional information (FRD 22B Appendix) In compliance with the requirements of the Standing Directions of the Minister for Finance, details in respect of the items listed below have been retained by <ABC Health Service> and are available to the relevant Ministers, Members of Parliament and the public on request (subject to the freedom of information requirements, if applicable): (a) A statement of pecuniary interest has been completed. (b) Details of shares held by senior officers as nominee or held beneficially. (c) Details of publications produced by the department about the activities of the entity and where they can be obtained. (d) Details of changes in prices, fees, charges, rates and levies charged by the entity. (e) Details of any major external reviews carried out on the entity. (f) Details of major research and development activities undertaken by the entity that are not otherwise covered either in the Report of Operations or in a document that contains the financial report and Report of Operations. (g) Details of overseas visits undertaken including a summary of the objectives and outcomes of each visit. (h) Details of major promotional, public relations and marketing activities undertaken by the entity to develop community awareness of the entity and its services. (i) Details of assessments and measures undertaken to improve the occupational health and safety of employees. (j) General statement on industrial relations within the entity and details of time lost through industrial accidents and disputes, which is not otherwise detailed in the Report of Operations. (k) A list of major committees sponsored by the entity, the purposes of each committee and the extent to which the purposes have been achieved. 13
  • 17. Other Information (a) FRD 11 Disclosure of Ex-Gratia Payments requires an entity to disclose in aggregate, in the notes to the financial statements, the nature and amount of any ex-gratia payments incurred and written off during the reporting period. (b) FRD 21A Responsible Person and Executive Officer Disclosures prescribes the disclosure requirements and procedures in respect of Responsible Persons, Relevant Ministers and Executive Officers. (c) the following information for contracts commenced and/or completed in the financial year must be disclosed under the Victorian Industry Participation Policy (VIPP) Act 2003 (Refer to FRD 25 Victorian Industry Participation Policy Disclosure in the Report of Operations): i. the number and total value of contracts commenced and/or completed in the financial year to which the VIPP applied; ii. the regional or metropolitan split by number and value of commenced and/or completed contracts; iii. for contracts commenced during the financial year, a statement of total VIPP commitments (local content, employment and skill/technology transfer commitments) made as a result of these contracts; and iv. for contracts completed during the financial year, a statement of total VIPP outcomes (local content, employment and skill/technology transfer outcomes) achieved as a result of these contracts. 14
  • 18. Key Financial and Service Performance Reporting A. For Health Services which have agreed a Statement of Priorities The Statement of Priorities (SoP) is the key document of accountability between the department and some entities. The SoP for each service is published annually by the department on its website. Each entity that has this form of agreement with the department must, as part of its Annual Report tabled in the Parliament, publish the outcomes it has achieved for each aspect of its SoP. This reporting, with the exception of the financial aspects, should be placed in a single location or chapter of the Annual Report. It may, if considered desirable, be interspersed at relevant points of the Annual Report at the discretion of the entity. Some data in this context is derived from unit level records by the department, entities may wish to verify final year result with the department as a precursor to publication. Instructions for reporting are set out below against each part of the SoP. Where a particular section does not appear in a particular entity’s SoP, results in that area should not be reported. Part A For this part and for all strategic / planning priorities add a column headed “Achievement” which briefly states the outcome for the year. “Completed” or “Priority deferred to 2009-10 due to departmental restructure” might be two examples of appropriate notations. Please provide information against each priority in the SoP. Sample layout: Part A Common requirements for all entities with a SoP. Strategic priorities for 2008-09 Strategic Priority Deliverables Due Achievement Date 1. Continue the Work with DHS to June implementation of implement the 2009 HealthSMART patient and client management system. Planning priorities for 2008-09 Planning priority Deliverables Achievement 1. Neurosciences Develop a ABC Health Neurosciences Service Plan 15
  • 19. Part B First section for all Entities with an SoP except Dental Health Services Victoria. Please include SoP outcomes/results in this section. Note that where these items are expressed elsewhere in the Annual Report as an achievement/outcome, they need not be reproduced separately here. Part B: Performance priorities Financial performance Operating result 2008-09 Actual ($M) Annual operating result Cash management/liquidity 2008-09 Actual Creditors Debtors Net movement in cash balance ($m) Service performance WIES activity performance 2008-09 Actual WlES performance to target (%) Elective Surgery 2008-09 Actual Elective Surgery admissions Critical Care 2008-09 Actual lCU minimum operating capacity – <ABC Health Service> NlCU standard and flex operating capacity-<ABC Health Service> 16
  • 20. Quality and Safety 2008-09 Actual Accreditation status (%) Cleaning standards (%) Submission of data to VICNISS (%) VICNISS Infection Surveillance Indicators Participation in the Hand Hygiene Program Maternity 2008-09 Actual Postnatal home care Mental Health 2008-09 Actual 28 day readmission rate (%) Access performance 2008-09 Actual Percentage of operating time on hospital bypass Percentage of emergency patients admitted to an inpatient bed within 8 hours Percentage of non-admitted emergency patients with length of stay of less than 4 hours Number of patients with length of stay in the emergency department greater than 24 hours Percentage of Triage Category 1 emergency patients seen immediately Percentage of Triage Category 2 emergency patients seen within 10 minutes Percentage of Triage Category 3 emergency patients seen within 30 minutes 17
  • 21. Elective surgery 2008-09 Actual Percentage of Category 1 elective patients admitted with in 30 days Percentage of Category 2 elective surgery patients waiting less than 90 days Percentage of Category 3 elective surgery patients waiting less than 365 days Number of patients on the elective surgery waiting list Number of Hospital Initiated Postponements (HiPs) per 100 scheduled admissions Part B Dental Health Services Victoria ONLY. Financial Performance Operating result 2008-09 Actual ($M) Annual operating result Cash management/liquidity 2008-09 Actual Creditors Debtors Net movement in cash balance ($m) Service Performance Ratio of emergency to general of dental care Proportion of dental remakes within 12 months Percentage of re-treatment within 12 months following completed endodontic treatment Percentage of extraction within 12 months following completed endodontic treatment Access Performance Category 1 clients treated within 24 hours Priority denture clients receiving treatment within 3 months State-wide average waiting time for non- urgent general dental care State-wide average waiting time for non- urgent denture care 18
  • 22. Percentage of agencies with average waiting time for general dental care of less than 3 years Percentage of agencies with average waiting time for denture care of less than 3 Years Proportion of pre-school aged children receiving care, who are dependants of eligible adults Percentage primary school children recalled in 24 months Percentage of high-risk school children recalled in 12 months Proportion of school children receiving care, who are dependants of eligible adults Percentage of high-risk young people attending 12 month recall Statewide function performance Performance measure 2008-09 Actual Implementation of Oral health promotion Implementation of the oral health workforce retention and recruitment strategy Implementation of the plan for the reduction of waiting times for general and denture care at agencies with the longest waiting times Part C First section for all Health Services with a SoP except Dental Health Services Victoria. While a budget is set against each item, this provides information on the basis upon which funds were allocated. The Annual Report should provide detail only on the activity undertaken by a service. Part C: Activity and Funding Activity and Funding Type 2008-09 Weighted Inlier Equivalent Separations Activity (WIES) Achievement WIES Public WIES Private WIES Renal Total WIES (Public, Private and Renal) WIES DVA WIES TAC WIES TOTAL Acute Non-Inpatient Emergency Services - Non-Admitted VACS - Allied Health VACS - Variable VACS - Other Non VACS Outpatients VACS Allied Health - DVA VACS Variable - DVA 19
  • 23. Non-acute Inpatient CRAFT Rehab L1 (non DVA) Rehab L2 (non DVA) GEM (non DVA) Palliative Care - Inpatient Palliative Care - Other Rehab 2 - DVA GEM -DVA Palliative Care - DVA NHT - DVA Non-acute Ambulatory Hospital Admission Risk Program (HARP) SACS - Non DVA SACS – Paediatric Post Acute Care Transition Care (Non DVA) - Bed day Transition Care (Non DVA) - Home day SACS - DVA Post Acute Care - DVA Aged Care Aged Care Assessment Service Other Aged Care Residential Aged Care Community Health/Primary Care Community Health · Direct Care CHC - Health Promotion & Workforce Development Specified Grants Mental Health Disability Other DHS Programs Transplants - Pancreas Part C Dental Health Services Victoria ONLY. Funded activity 2008-09 Actual Community Dental Care RDHM Dental Care School Dental Care Block funded activities Report against each measure listed. 20
  • 24. B. For all other Health Services Activity Admitted Patient - Note (a) Acute Sub- Mental Other Total Acute Health Separations Same Day Multi Day Total Separations Emergency Elective Other inc Maternity Total Separations Total WIES Total Bed Days Admitted patient data is to be sourced from the Victorian Admitted Episode Dataset (VAED) where feasible, and definitions should be in accordance with the Standards in the VAED manual Version 17. As the final VAED consolidation is scheduled to occur on 17 September and preparation of the data for the above table will be occurring before then, some estimation especially in Weighted Inlier Equivalent Separation (WIES) will be required to complete the table. Non Admitted Patients Acute Sub- Mental Other Total Acute Health Emergency Department Presentations Outpatient Services - occasions of services (VACS and Non VACS clinics) Other Services - occasions of services Total occasions of service Victorian Ambulatory Classification System - Number of encounters (applicable to health service / hospital allocated with VACS throughput targets) Non-admitted data should be in accordance with the definitions in the Victorian Emergency Minimum Dataset (VEMD) Manuals for those health service/hospitals reporting on that system or otherwise the AIMS manuals. Refer to the s2, s9 and s92 forms for the relevant programs. For mental health program, data for emergency presentations and outpatient services should be sourced from VEMD and CMI / ODS respectively. Note (a) Care Type Allocation Commentary Health services should allocate Care Types as follows: Acute (4,U); Mental (5); Sub-Acute (1,2,6,7,8,9,E,F,K,P); Other (0). Health Services should explain what services are provided under each care type in the Annual Report. 21
  • 25. Attestation on Data Accuracy I, <Donald Trump> certify that the <ABC Health Service> has put in place appropriate internal controls and processes to ensure that the Department of Human Services is provided with data that reflects actual performance. The <ABC Health Service> has critically reviewed these controls and processes during the year. <Signature> <Donald Trump> Accountable Officer Big Town 25 August 2009 Commentary – Attestation on Data Accuracy Following adverse publicity on waiting list data, the Minister has written to Board Chairs regarding data accuracy, laying out requirements for both the statement of priorities for 2009-10 and the annual report. In that letter he states that” "I wish to reiterate that you and your board are accountable for the accuracy of data that your health service reports. I expect that each board makes this a responsibility of its Audit Committee, and ensures that data accuracy is subject to appropriate controls, including regular internal audit. In future, I will specify this responsibility in the Statement of Priorities". "In addition, I will require each health service board to provide a statement in its annual report to Parliament that it has all appropriate systems and processes in place to assure the quality of reported data, and to identify those measures". 22
  • 26. 3. Revenue Indicators To be completed by all health services Average Collection Days 2009 2008 Private TAC VWA Other Compensable Psychiatric Residential Aged Care Debtors Outstanding as at 30 June 2009 Under 31-60 61-90 Over 90 Total Total 30 days days days 30/6/09 30/6/08 days Private TAC VWA Other Compensable Psychiatric Residential Aged Care ABBREVIATIONS: TAC Transport Accident Commission VWA Victorian WorkCover Authority 23
  • 27. Classifying Transactions to the Health Service Agreement (HSA) or Hospital and Community Initiatives (H&CI) The HSA category encompasses all the services that DHS funds, partly or wholly via a Health Services Agreement and/or Statement of Priorities. The HSA category also encompasses funding from third parties (eg Commonwealth) that support the operations of these services. Examples of transactions to be classified to the HSA category which have been previously treated inconsistently include: • Low care aged residential care services (hostels). Direct funding support has been provided in 2008-09 (HSUA wage increase) and indirect resources are provided by DHS to support accreditation. • Program of Aids for Disabled People. This is a service funded through the HSA. • Public hospital services provided to privately insured and other non-public patients. Unless provided directly through separate specific purpose funds established in accordance with DHS business rules, services to these patients are to be treated as a full or partial cost recovery extension of an HSA funded service. The H&CI category encompasses health expenses and revenues relating to health services that are not supported by the HSA as well as expenses and revenues for other kinds of services. Services to be classified to the H&CI category include: • Private hospitals owned by the public hospital/health service • Services provided under contract to co-located private hospitals • Separate internal and restricted specific purpose funds selling goods or services of a retail or commercial or medical nature to external parties (eg. cafeterias, food catering, car park, linen services, cleaning services, privatised clinical services) • Health services that are wholly funded by the Commonwealth, plus client co-payments (eg. CACPs, EACH, Day Therapy Centres) • Services provided to DHS under non-HSA arrangements, such as commercial contracts • Health services provided on a contractual basis to external parties (eg. public hospital beds provided to private hospitals) • Special projects and trust funds that are required to be accounted for outside the HSA category (eg. Coordinated Care trials) • Research wholly funded by the Commonwealth and other government or non-government agencies. 24
  • 28. General Issues Reporting Entity (Consolidation) Under AASB 127 Consolidated and Separate Financial Statements, a reporting entity includes an economic entity comprising the parent entity and its controlled entities. Essentially, in the Standard, it is the control rather than ownership that provides the criterion which is fundamental to the identification of the group of related entities to be consolidated. Control is defined in AASB 127 paragraph 4 as the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In AASB 127 paragraph 13, control is presumed to exist when the parent owns, directly or indirectly through subsidiaries, more than half of the voting power of an entity unless, in exceptional circumstances, it can be clearly demonstrated that such ownership does not constitute control. Control also exists when the parent owns half or less of the voting power of an entity when there is: (a) power over more than half of the voting rights by virtue of an agreement with other investors; (b) power to govern the financial and operating policies of the entity under a statute or an agreement; (c) power to appoint or remove the majority of the members of the board of directors or equivalent governing body and control of the entity is by that board or body; or (d) power to cast the majority of votes at meetings of the board of directors or equivalent governing body and control of the entity is by that board or body. Further guidance on the concept of control is also provided in AASB Interpretation 112 Consolidation – Special Purpose Entities. When control is established in accordance with AASB 127 or Interpretation 112, then the operations are to be reported in the consolidated accounts. Where the gross revenue or total assets of the operations are equal to or less than five per cent of the principal entity's revenue or total assets, the operations are immaterial unless there is evidence to the contrary. Otherwise, the controlled entity information would normally be shown in aggregate with the entity total in the consolidated totals of the economic entity and not as a segment to the consolidated financial statements. Any inter/entity transactions between the entity and the controlled entity should be eliminated to avoid double counting. A majority of criteria does not need to be satisfied to qualify for consolidation. Substance over form needs to be applied in the final analysis. Comparative Figures Entities should also comply with the requirements on comparative information in AASB 101 Presentation of Financial Statements. 25
  • 29. Attestation on Compliance with Australian/New Zealand Risk Management Standard I, <Donald Trump> certify that the <ABC Health Service> has risk management processes in place consistent with the Australian/New Zealand Risk Management Standard and an internal control system is in place that enables the executives to understand, manage and satisfactorily control risk exposures. The audit committee verifies this assurance and that the risk profile of the <ABC Health Service> has been critically reviewed within the last 12 months. <Signature> <Donald Trump> Accountable Officer Big Town 25 August 2009 Commentary – Attestation on Compliance with Australian/New Zealand Risk Management Standard To ensure that risks are being managed in a consistent manner, entities are required to attest in annual reports that: • services have risk management processes in place consistent with the Australian/New Zealand Risk Management Standard (or equivalent designated standard); • these processes are effective in controlling the risks to a satisfactory level; and • a reasonable body or audit committee verifies that view Attestation of compliance should be made annually in the report of operations and the person making the attestation, usually the chief executive officer or accountable officer, should not make the attestation unless the audit committee or responsible body (for instance the board of a statutory authority) agrees that such an assurance can be given. Entities are strongly encouraged to read the Victorian Government Risk Management Framework published by the Department of Treasury and Finance for more information on Risk Management Standard. 26
  • 30. Disclosure Index The Annual Report of the <ABC Health Service> is prepared in accordance with all relevant Victorian legislation. This index has been prepared to facilitate identification of the Department’s compliance with statutory disclosure requirements. Note: This Disclosure Index consists of 2 pages, and is not required to be completed by denominational hospitals. Legislation Requirement Page Reference Ministerial Directions Report of Operations Charter and purpose FRD 22B Manner of establishment and the relevant Ministers 11, 133 FRD 22B Objectives, functions, powers and duties 11 FRD 22B Nature and range of services provided 11 Management and structure FRD 22B Organisational structure 11 Financial and other information FRD 10 Disclosure index 13, 27 FRD 11 Disclosure of ex-gratia payments 14, 76 FRD 21A Responsible person and executive officer disclosures 14, 133, 134 FRD 22B Application and operation of Freedom of Information Act 1982 13 FRD 22B Application and operation of Whistleblowers Protection Act 2001 13 FRD 22B Compliance with building and maintenance provisions of Building 13 Act 1993 FRD 22B Details of consultancies over $100,000 12 FRD 22B Details of consultancies under $100,000 12 FRD 22B Major changes or factors affecting performance 12 FRD 22B Occupational health and safety 13 FRD 22B Operational and budgetary objectives and performance against 12 objectives FRD 22B Significant changes in financial position during the year 12 FRD 22B Statement of availability of other information 13 FRD 22B Statement of merit and equity 11 FRD 22B Statement on National Competition Policy 13 FRD 22B Subsequent events 136 FRD 22B Summary of the financial results for the year 12 FRD 22B Workforce Data Disclosures 11 FRD 25 Victorian Industry Participation Policy disclosures 11, 14 SD 4.2(j) Report of Operations, Responsible Body Declaration 10 SD 4.5.5 Attestation on Compliance with Australian/New Zealand Risk 26 Management Standard 27
  • 31. Legislation Requirement Page Reference Financial Statements Financial statements required under Part 7 of the FMA SD 4.2(a) Compliance with Australian accounting standards and other 45 authoritative pronouncements SD 4.2(b) Operating Statement 34 SD 4.2(b) Balance Sheet 37 SD 4.2(b) Statement of Changes in Equity 39 SD 4.2(b) Cash Flow Statement 41 SD 4.2(c) Accountable officer’s declaration 31 SD 4.2(c) Compliance with Ministerial Directions 45 SD 4.2(d) Rounding of amounts 45 Legislation Freedom of Information Act 1982 13 Whistleblowers Protection Act 2001 13 Victorian Industry Participation Policy Act 2003 11, 14 Building Act 1993 13 Financial Management Act 1994 1 28
  • 32. Financial Statements and Explanatory Notes Introduction The following financial statements and explanatory notes have been prepared to assist entities in preparing their 2008-09 annual report. The explanatory notes deal with a range of particular matters that are intended to provide guidance to entities. The formats and notes for the annual report should not be seen as restrictive; they are intended to guide entity management in determining the type and level of information required. However, to ensure consistency in report presentation, entities should not adopt a format substantially different from the format described in these guidelines. It is emphasised that the formats and notes for the annual report are the minimum requirements and entities are encouraged to provide additional information where necessary in the interests of presenting fairly their results and financial position and achieving informative disclosure. These Guidelines do not, and cannot be expected to cover all situations that may be encountered in practice. There may be unusual events or transactions that are not illustrated, where officers will need to use their professional judgement to make appropriate disclosures. On the other hand, some disclosures shown as examples may not be relevant and should be omitted where appropriate. Care should be taken to ensure that disclosures accurately represent each entity’s actual accounting policies and not repeated verbatim from these guidelines unless appropriate. Therefore, knowledge of the disclosure provisions of Australian Accounting Standards and Australian Interpretations are pre-requisites for the preparation of financial statements. These guidelines provide formats for: • Operating Statement. • Balance Sheet. • Statement of Changes in Equity. • Cash Flow Statement. • Accountable officer’s, chief finance & accounting officer’s and member of responsible body’s declaration. • Notes to the financial statements. The Consolidated column in the statements is only to be used where controlled entities (subsidiaries) are included. Health services with no controlled entities are to use the Total columns for the aggregate of health service and segment items. The Operating Statement, Balance Sheet, Statement of Changes in Equity and Cash Flow Statement must be cross- referenced to notes to explain relevant items included in those statements. VAGO’s audit report on the financial statements will be signed and dated on the basis of the final set of accounts signed by the entity. Financial statements, having been subject to an entity’s quality assurance processes, are to be submitted for audit by VAGO, by 24 July 2009 for material entities and within 8 weeks of the end of the financial year for non-material entities (s45 (2) of the Act), by 25 August 2009 (though to meet Ministerial tabling timelines non-material entities should aim for 10 August 2009). VAGO will audit the financial statements to meet annual reporting requirements under the Act. 29
  • 33. Commentary – Financial Report Materiality and Aggregation Each material class of similar items shall be presented separately in the financial report. Items of a similar nature or function shall be presented separately unless they are immaterial. Consistency The presentation and classification of items in the financial report shall be retained from one period to the next unless: (a) it is apparent, following a significant change in the nature of the entities operations or a review of its financial report, that another presentation or classification would be more appropriate having regard to the criteria for the selection and application of accounting policies in AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors; or (b) an Australian Accounting Standard requires a change in presentation. Goods and Services Tax (GST) Interpretation 1031 Accounting for Goods and Services Tax (GST) provides that assets shall be recognised net of the amount of goods and services tax (GST), except where: • the amount of GST incurred by a purchaser that is not recoverable from the taxation authority shall be recognised as part of the cost of acquisition of an asset or as part of an item of expense. • the interpretation provides that receivables and payables shall be stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority shall be included as part of receivables or payables in the balance sheet. Offsetting Income, expenses, assets and liabilities can only be offset where required or permitted by an Accounting Standard, for example, AASB 132 Financial Instruments: Presentation and Financial Reporting Directions issued by DTF. 30
  • 34. <ABC Health Service> Board member’s, accountable officer’s and chief finance & accounting officer’s declaration We certify that the attached financial report for <ABC Health Service> has been prepared in accordance with Standing Direction 4.2 of the Financial Management Act 1994, applicable Financial Reporting Directions, Australian Accounting Standards, Australian Accounting Interpretations and other mandatory professional reporting requirements. We further state that, in our opinion, the information set out in the Operating Statement, Balance Sheet, Statement of Changes in Equity, Cash Flow Statement and notes forming part of the financial report, presents fairly the financial transactions during the year ended 30 June 2009 and financial position of <ABC Health Service> at 30 June 2009. We are not aware of any circumstance which would render any particulars included in the financial report to be misleading or inaccurate. We authorise the attached financial report for issue on this day. <Signature> <Signature> <Signature> <Donald Duck> <Donald Trump> <Robin Hood> Board Member Accountable Officer Chief Finance & Accounting Officer Big Town Big Town Big Town 25 August 2009 25 August 2009 25 August 2009 N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity should 31 ensure that their accounting policies are presented in their financial statements.
  • 35. Auditor-General’s Report Please insert a copy of the VAGO’s original audit report. A reproduction of the audit report is not acceptable. VAGO’s report comprises 2 pages. N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity should 32 ensure that their accounting policies are presented in their financial statements.
  • 36. Auditor-General’s Report Page 2 Operating Statement Commentary – Operating Statement Accounting Standard AASB 101 Presentation of Financial Statements sets out the presentation of the Operating Statement. The Operating Statement has been developed to be consistent with existing Government, Departmental and Health Service sector requirements. The notes supporting this statement are arranged to identify services supported by Health Service Agreement and those supported by Hospital and Community Initiatives. In developing the Operating Statement, reference has been made to the AIMS F1 return. In preparing the Operating Statement, the Health Service should refer to the relevant classifications and definitions in the Finance and Accounting Manual and AIMS guidelines. The line item ‘Net Result Before Capital & Specific Items1’ must be less prominent than the line item ‘Net Result For The Period1’. Revenues / gains should be reported as a positive amount and expenses / losses should be reported as a negative amount (i.e. in brackets). ------------------------- (1) If there is a discontinued operation, then the headings mentioned above will have the words “From Continuing N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity should 33 ensure that their accounting policies are presented in their financial statements.
  • 37. Operations” inserted into them Recognition of Revenue AASB 1004 Contributions draws a distinction between reciprocal and non-reciprocal transactions. The Standard states that an entity receives a non-reciprocal transfer where assets or services are provided or liabilities extinguished without the entity directly giving approximately equal value in exchange to the other party or parties to the transfer. The revenue arising from the transfer must be recognised when the entity gains control of the transfer. It follows that a reciprocal transfer can be deferred and reported as a liability. For a better understanding of AASB 1004, you are advised to familiarise yourself with the full text of this Standard and Hospital Circular 34/2008. Note 1(ad) of these guidelines, contains a broad statement in relation to revenue recognition that each entity needs to elaborate upon, in order to fully disclose material revenue recognition policy for each revenue source. Capital Purpose Income and Minor Works Grants As outlined in the financial section of the AIMS Manual, capital purpose income refers to all tied grants, donations and bequests received for the purpose of acquiring non-current assets such as capital works, plant and equipment. As such these receipts should be reported as part of Capital Purpose Income in Note 2. Similarly, the cost of equipment donated by medical practitioners should also be reported under this heading. Capital Purpose Income is further defined in section 5.6 of Chart of Accounts - Business Rules. A copy can be accessed at http://www.health.vic.gov.au/accounts/bizrules-v9-august08.pdf The Department established an annual capital equipment funding pool called Targeted Equipment Grants. From this funding pool, Health Services bid for grants towards higher-cost replacement or new items of equipment not funded under other special-purpose capital funding programs. The allocation of these grants is submission based and for the purchase of equipment only. As such funding received under this program must be reported as capital purpose income. Non-Refundable Fees Accommodation bonds received by residential aged care services may relate to future services to be provided. In that instance, the accommodation bonds should be apportioned between financial years. Accommodation bonds which are deferred to future financial years should be described as deferred revenue and be classified between current and non-current liabilities. Refundable Fees The liability which arises from refundable ingoing fees or accommodation bonds received by residential aged care services should be recorded as patients' monies held in trust and classified as current liabilities. These fees should not be classified as “Interest Bearing Liabilities”. Reporting of Capital and Specific Items The amounts for capital and specific items (eg, depreciation, capital purpose income, Specific Income, specific expense etc) must be the same as those reported in the supporting notes to the Operating Statement. N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity should 34 ensure that their accounting policies are presented in their financial statements.
  • 38. Balance Sheet Commentary – Balance Sheet N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity should 35 ensure that their accounting policies are presented in their financial statements.
  • 39. Balance Sheet Accounting Standard AASB 101 Presentation of Financial Statements sets out the presentation of the Balance Sheet. Presentation of Assets and Liabilities Assets and liabilities must be categorised as either current or non-current categories, except when a presentation based on liquidity provides information that is reliable and is more relevant. Where the assets or liabilities are aggregated, amounts expected to be recovered or settled both before and after twelve months from the reporting date must be separately disclosed. Additional Disclosures Where relevant, further sub-classifications of amounts should be disclosed separately in accordance with AASB 101 (74) on either the face of the Balance Sheet or in the notes. Line items, sub-headings and sub-totals in addition to those required by AASB 101 (68, 68A) must be separately disclosed on the face of the Balance Sheet when required by an Accounting Standard, or when necessary for an understanding of the health service’s financial position. Presentation of a Non-Current Asset Classified as Held for Sale An entity shall not reclassify or re-present amounts presented for non-current assets as held for sale in the balance sheets for prior periods to reflect the classification in the balance sheet for the latest period presented. N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity should 36 ensure that their accounting policies are presented in their financial statements.
  • 40. Commentary – Statement of Changes in Equity Accounting Standard AASB 101 Presentation of Financial Statements sets out the presentation of the Statement of Changes in Equity. Information to be disclosed On the face of the statement A Statement of Changes in Equity should show the following on the face of the statement: a) profit or loss for the period; b) each item of income and expense for the period that, as required by other Standards, is recognised directly in equity, and the total of these items; c) total income and expense for the period (calculated as the sum of (a) and (b)), showing separately the total amounts attributable to equity holders of the parent and to minority interest; and d) for each component of equity, the effects of changes in accounting policies and corrections of errors recognised in accordance with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors. A Statement of Changes in Equity that comprises only these items shall be titled a Statement of Recognised Income and Expense. Where an entity recognises actuarial gains and losses with respect to defined benefit plans outside profit or loss, the entity shall present a Statement of Recognised Income and Expense containing only the items listed above. The entity cannot present the more detailed statement as illustrated in these guidelines. Either on the face of the statement or in the notes An entity should also present, either on the face of the Statement of Changes in Equity or in the notes to the financial statements: a) the amounts of transactions with equity holders acting in their capacity as equity holders, showing separately distributions to equity holders; b) the balance of accumulated funds at the beginning of the period and at the reporting date, and the changes during the period; and c) a reconciliation between the carrying amount of each class of contributed equity and N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity should 37 ensure that their accounting policies are presented in their financial statements.
  • 41. each reserve at the beginning and the end of the period, separately disclosing each change. Full reconciliation of each class of equity should be included in the equity note. These disclosures have not been illustrated in the example on the face of the Statement of Changes in Equity. These disclosure requirements are illustrated in Note 20 in the guide. Other Changes in an entity’s equity between two reporting dates reflect the increase or decrease in its net assets during the period. Except for changes resulting from transactions with equity holders acting in their capacity as equity holders and transaction costs directly related to such transactions, the overall change in equity during a period represents the total amount of income and expenses, including gains and losses, generated by the entities activities during that period (whether those items of income and expenses are recognised in profit or loss or directly as changes in equity). Note that where an entity has no amounts applicable to any individual line item, that line item should not be included in the Statement of Changes in Equity. N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity should 38 ensure that their accounting policies are presented in their financial statements.
  • 42. OLE_LINK Commentary - Cash Flow Statement N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity should 39 ensure that their accounting policies are presented in their financial statements.
  • 43. Accounting Standards for the Cash Flow Statement are set out in AASB 107 Cash Flow Statements. The financial statements shall disclose by way of note, the policy adopted for determining which items are classified as cash in the Cash Flow Statement. Cash and cash equivalents Cash assets include cash on hand and cash equivalents, where; • Cash on hand means notes and coins held, and deposits held at call with a financial institution • Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. • The cash equivalents are restrictive as to maturity periods and risk of changes in value. A short period to maturity generally means that an investment qualifies as a cash equivalent only when it has a maturity of three months or less from the date of acquisition. Reporting of gross or net cash flows Gross cash inflows and outflows must be separately disclosed, except for the following items which may be reported on a net basis: • Items where the entity is, in substance, holding or disbursing cash on behalf of its customers (eg. funds held for customers by a fund manager); and • Items where turnover is quick, the amounts are large, and the maturities are short (quick turnover means that transactions occur on virtually a day-to-day basis) Furthermore, the amounts of cash at the beginning and end of the reporting period shall be shown in the Cash Flow Statement. The cash balance as at the end of the reporting year shown in the Cash Flow Statement shall be reconciled by way of note in the financial statements to the related items in the Balance Sheet of the same reporting period. A reconciliation of cash and net cash used in operating activities to net results must be disclosed as a note. If entities merge or acquire entities, the cash in bank from the acquired entities will be a cash inflow to the entity. A note to the statement will be required to describe the acquisition as a non- cash transaction if no purchase amount is paid. Acquisitions that do not involve cash, for example an asset swap or liability undertaking, must be reported as a note. Classification of cash flows Cash flows must be classified as arising from operating, investing or financing activities, as appropriate. Other classifications are not permitted. Interest and dividends As per FRD 110 Cash Flow Statements, interest paid and interest and dividends received must be classified as operating cash flows. Capital Grants Capital appropriations from Government must be presented under “Cash Flows from Operating Activities” unless the grant is an appropriation for additions to net asset base or is formally designated to be transferred as contributed capital, in which case, it must be classified as cash flows from financing activities. Refer to FRD 110 for further details. Goods and Services Tax (GST) Cash flows relating to GST must be included in the Cash Flow Statement on a gross basis in accordance with AASB 107 Cash flow statements The GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority must be, classified as operating cash flows. Additional guidance on accounting for GST is provided in Interpretation 1031 Accounting for the Goods and Services Tax (GST). N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity should 40 ensure that their accounting policies are presented in their financial statements.
  • 44. ABC Health Service Notes to the Financial Statements 30 June 2009 Notes to the Financial Statements 30 June2009 Table of Contents Note 1 Statement of Significant Accounting Policies...............................................................45 2 Revenue.................................................................................................................65 2a Analysis of Revenue by Source..................................................................................67 2b Patient and Resident Fees.........................................................................................73 2c Net Gain/(Loss) on Disposal Non-Current Assets..........................................................74 2d Assets Received Free of Charge or For Nominal Consideration.......................................74 2e Specific Income.......................................................................................................75 3 Expenses................................................................................................................76 3a Analysis of Expenses by Source.................................................................................78 3b Analysis of Expenses by Internal and Restricted Specific Purpose Funds for Services Supported by Hospital and Community Initiatives......................................................82 3c Specific Expenses....................................................................................................82 4 Depreciation and Amortisation..................................................................................84 5 Finance Costs.........................................................................................................85 6 Cash and Cash Equivalents.......................................................................................86 7 Receivables............................................................................................................87 8 Other Financial Assets..............................................................................................89 9 Inventories.............................................................................................................91 10 Non-Financial Assets Classified as Held for Sale...........................................................92 11 Other Assets...........................................................................................................93 12 Investments Accounted for Using the Equity Method....................................................94 13 Property, Plant & Equipment.....................................................................................96 14 Intangible Assets.....................................................................................................99 15 Investment Properties............................................................................................101 16 Payables...............................................................................................................102 17 Interest Bearing Liabilities......................................................................................104 18 Employee Benefits and Related On-Costs Provisions...................................................106 19 Other Liabilities.....................................................................................................109 20 Equity..................................................................................................................110 21 Reconciliation of Net Result for the Year to Net Cash Inflow/(Outflow) from Operating Activities.............................................................................................................113 22 Non-Cash Financing and Investing Activities..............................................................114 23 Financial Instruments.............................................................................................115 24 Commitments for Expenditure.................................................................................125 25 Contingent Assets and Contingent Liabilities..............................................................128 26 Segment Reporting................................................................................................129 27 Jointly Controlled Operations and Assets...................................................................132 28a Responsible Person Disclosures................................................................................133 28b Executive Officer Disclosures...................................................................................134 29 Events occurring after the Balance Sheet Date..........................................................136 30 Controlled Entities.................................................................................................137 31 Economic Dependency............................................................................................137 32 Discontinued Operations.........................................................................................138 33 Correction of Error and Revision of Estimates............................................................140 N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity 41 should ensure that their accounting policies are presented in their financial statements.
  • 45. ABC Health Service Notes to the Financial Statements 30 June 2009 Commentary – Notes to the Financial Statements A contents page for notes is not mandatory; however it may assist readers to understand the financial report. Content The notes to the financial statements of an entity shall: a) Present information about the basis of preparation of the financial report and the specific accounting policies used in accordance with paragraphs 108-115 of AASB 101 Presentation of Financial Statement; b) Disclose the information required by Australian Accounting Standards that is not presented on the face of the balance sheet, operating statement, statement of changes in equity or cash flow statement; and c) Provide additional information that is not presented on the face of the balance sheet, operating statement, statement of changes in equity or cash flow statement, but is relevant to an understanding of any of them. Systematic structure Notes shall, as far as practicable, be presented in a systematic manner. Each item on the face of the balance sheet, operating statement, statement of changes in equity and cash flow statement shall be cross referenced to any related information in the notes. Notes are normally presented in the following order, which assists users in understanding the financial report and comparing them with financial reports of other entities: a) A statement that the financial statements have been prepared in accordance with Australian Accounting Standards (refer paragraph 15.2 AASB 101); b) A summary of significant accounting policies applied (refer to paragraph 108 of AASB 101); c) Supporting information for items presented on the face of the balance sheet, operating statement, statement of changes in equity and cash flow statement, in order in which each statement and each line item is presented; and d) Other disclosures, including: i. Contingent liabilities (refer to AASB 137) and unrecognised contractual commitments; and ii. Non-financial disclosures; for example, the entity’s financial risk management objectives and policies (refer to AASB 7). In some circumstances, it may be necessary or desirable to vary the ordering of specific items within the notes. For example, information on changes in fair value recognised in profit or loss may be combined with information on maturities of financial instruments, although the former disclosures relate to the operating statement and the latter relate to the balance sheet. Nevertheless, a systematic structure for the notes is retained as far as practicable. N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity 42 should ensure that their accounting policies are presented in their financial statements.
  • 46. ABC Health Service Notes to the Financial Statements 30 June 2009 Note 1: Statement of Significant Accounting Policies (a) Statement of compliance The financial report is a general purpose financial report which has been prepared on an accrual basis in accordance with the Financial Management Act 1994 and applicable Australian Accounting Standards (AASs) and Australian Accounting Interpretation. AASs includes Australian equivalents to International Financial Reporting Standards. The entity is a not-for profit entity and therefore applies the additional Aus paragraphs applicable to “not-for-profit” entities under the AAS’s. (b) Basis of preparation The financial report is prepared in accordance with the historical cost convention, except for the revaluation of certain non-financial assets and financial instruments, as noted. Cost is based on the fair values of the consideration given in exchange for assets. In the application of AASs management is required to make judgments, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision, and future periods if the revision affects both current and future periods. Accounting policies are selected and applied in a manner which ensures that the resulting financial information satisfies the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions or other events is reported. The accounting policies set out below have been applied in preparing the financial report for the year ended 30 June 2009, and the comparative information presented in these financial statements for the year ended 30 June 2008. (c) Reporting Entity The financial report includes all the controlled activities of the <ABC Health Service>. (d) Rounding Of Amounts All amounts shown in the financial report are expressed to the nearest $1,000 (if total assets, or revenue, or expenses are less than $10 million, amounts must be rounded off to the nearest dollar) unless otherwise stated. (e) Principles of Consolidation The assets, liabilities, incomes and expenses of all controlled entities of the <ABC Health Service> have been included at the values shown in their audited Annual Financial Reports. Subsidiaries are entities controlled by <ABC Health Service>; control exists when <ABC Health Service> has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable are taken into account. Any inter-entity transactions have been N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity 43 should ensure that their accounting policies are presented in their financial statements.
  • 47. ABC Health Service Notes to the Financial Statements 30 June 2009 eliminated on consolidation. The consolidated financial statements include the audited financial statements of the controlled entities listed in note 30. (f) Cash and Cash Equivalents Cash and cash equivalents comprise cash on hand and cash at bank, deposits at call and highly liquid investments with an original maturity of 3 months or less, which are readily convertible to known amounts of cash and are subject to insignificant risk of changes in value. For the cash flow statement presentation purposes, cash and cash equivalents includes bank overdrafts, which are included as current borrowings in the balance sheet. (g) Receivables Trade debtors are carried at nominal amounts due and are due for settlement within 30 days from the date of recognition. Collectability of debts is reviewed on an ongoing basis, and debts which are known to be uncollectible are written off. A provision for doubtful debts is raised where doubt as to collection exists. Bad debts are written off when identified. Receivables are recognised initially at fair value and subsequently measured at amortised cost, using the effective interest rate method, less any accumulated impairment. (h) Inventories Inventories include goods and other property held either for sale or for distribution at no or nominal cost in the ordinary course of business operations. It includes land held for sale and excludes depreciable assets. Inventories held for distribution are measured at cost, adjusted for any loss of service potential. All other inventories, including land held for sale, are measured at the lower of cost and net realisable value. Bases used in assessing loss of service potential for inventories held for distribution include current replacement cost and technical or functional obsolescence. Technical obsolescence occurs when an item still functions for some or all of the tasks it was originally acquired to do, but no longer matches existing technologies. Functional obsolescence occurs when an item no longer functions the way it did when it was first acquired. Cost is assigned to land for sale (undeveloped, under development and developed) and to other high value, low volume inventory items on a specific identification of cost basis (identify classes). Cost for all other inventory is measured on the basis of weighted average cost. Inventories acquired for no cost or nominal considerations are measured at current replacement cost at the date of acquisition. (i) Other Financial Assets Other financial assets are recognised and derecognised on trade date where purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, net of transaction costs. N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity 44 should ensure that their accounting policies are presented in their financial statements.
  • 48. ABC Health Service Notes to the Financial Statements 30 June 2009 The <ABC Health Service> classifies its other financial assets between current and non- current assets based on the purpose for which the assets were acquired. Management determines the classification of its other financial assets at initial recognition. <ABC Health Service> assesses at each balance sheet date whether a financial asset or group of financial assets is impaired. Financial assets at fair value through profit or loss Financial assets held for trading purposes are classified as current assets and are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset. Fair value is determined in the manner described in Note 23. (omit if not applicable) (If a Health Service has reclassified any financial assets from this category into loans and receivables category in accordance with AASB 2008-10, that fact may be disclosed in this section of the policy note. Health Services should discuss any proposed reclassifications with their VAGO representative at an early stage) Loans and receivables Trade receivables, loans and other receivables are recorded at amortised cost, using the effective interest method, less impairment. 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. (omit if not applicable) Held-to-maturity investments Where the entity has the positive intent and ability to hold investments to maturity, they are stated at amortised cost less impairment losses. (omit if not applicable) Available-for-sale financial assets Other financial assets held by the entity are classified as being available-for-sale and are stated at fair value. Gains and losses arising from changes in fair value are recognised directly in equity until the investment is disposed of or is determined to be impaired, at which time the cumulative gain or loss previously recognised in equity is included in profit or loss for the period. Fair value is determined in the manner described in Note 23. (omit if not applicable) (j) Intangible Assets Intangible assets represent identifiable non-monetary assets without physical substance such as patents, trademarks, computer software and development costs (where applicable). Intangible assets are initially recognised at cost. Subsequently, intangible assets with finite useful lives are carried at cost less accumulated amortisation and accumulated impairment losses. Costs incurred subsequent to initial acquisition are capitalised when it is expected that additional future economic benefits will flow to the entity. N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity 45 should ensure that their accounting policies are presented in their financial statements.
  • 49. ABC Health Service Notes to the Financial Statements 30 June 2009 Amortisation is allocated to intangible assets with finite useful lives on a systematic (typically straight-line) basis over the asset’s useful life. Amortisation begins when the asset is available for use, that is, when it is in the location and condition necessary for it to be capable of operating in the manner intended by management. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each annual reporting period. In addition, an assessment is made at each reporting date to determine whether there are indicators that the intangible asset concerned is impaired. If so, the assets concerned are tested as to whether their carrying value exceeds their recoverable amount. Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually or whenever there is an indication that the asset may be impaired. The useful lives of intangible assets that are not being amortised are reviewed each period to determine whether events and circumstances continue to support an indefinite useful life assessment for that asset. In addition, the entity tests all intangible assets with indefinite useful lives for impairment by comparing its recoverable amount with its carrying amount: • annually, and • whenever there is an indication that the intangible asset may be impaired. Any excess of the carrying amount over the recoverable amount is recognised as an impairment loss. Intangible assets with finite useful lives are amortised over a 10-15 year period (2008 10-15 years). (k) Property, Plant and Equipment Crown Land is measured at fair value with regard to the property’s highest and best use after due consideration is made for any legal or constructive restrictions imposed on the asset, public announcements or commitments made in relation to the intended use of the asset. Theoretical opportunities that may be available in relation to the asset(s) are not taken into account until it is virtually certain that any restrictions will no longer apply. Land and Buildings are recognised initially at cost and subsequently measured at fair value less accumulated depreciation and impairment. Plant, Equipment and Vehicles are recognised initially at cost and subsequently measured at fair value less accumulated depreciation and impairment. Cultural, Collections, Heritage Assets and Other Non-Current Physical Assets that the State intends to preserve because of their unique historical, cultural or environmental attributes are measured at the cost of replacing the asset less, where applicable, accumulated depreciation calculated on the basis of such cost to reflect the already consumed or expired future economic benefits of the asset. Restrictive nature of cultural and heritage assets, Crown land and infrastructure assets During the reporting period, the entity may hold cultural assets, heritage assets, Crown land and infrastructure assets. Such assets are deemed worthy of preservation because of the social rather than financial benefits they provide to the community. The nature of these assets means that there are certain limitations and restrictions imposed on their use and/or disposal. N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity 46 should ensure that their accounting policies are presented in their financial statements.
  • 50. ABC Health Service Notes to the Financial Statements 30 June 2009 (l) Revaluations of Non-current Physical Assets Non-current physical assets measured at fair value are revalued in accordance with FRD 103D. This revaluation process normally occurs every five years, based upon the asset’s Government Purpose Classification, but may occur more frequently if fair value assessments indicate material changes in values. Revaluation increments or decrements arise from differences between an asset’s carrying value and fair value. Revaluation increments are credited directly to the asset revaluation reserve, except that, to the extent that an increment reverses a revaluation decrement in respect of that class of asset previously recognised at an expense in net result, the increment is recognised as income in the net result. Revaluation decrements are recognised immediately as expenses in the net result, except that, to the extent that a credit balance exists in the asset revaluation reserve in respect of the same class of assets, they are debited directly to the asset revaluation reserve. Revaluation increases and revaluation decreases relating to individual assets within an asset class are offset against one another within that class but are not offset in respect of assets in different classes. Revaluation reserves are not transferred to accumulated funds on derecognition of the relevant asset. In accordance with FRD 103D <ABC Health Service’s> non-current physical assets were subjected to a detailed valuation in the current financial year. (m) Investment Property Investment properties represent properties held to earn rentals or for capital appreciation or both. Investment properties exclude properties held to meet service delivery objectives of the State of Victoria. Investment properties are initially recognised at cost. Costs incurred subsequent to initial acquisition are capitalised when it is probable that future economic benefits in excess of the originally assessed performance of the asset will flow to the entity. Subsequent to initial recognition at cost, investment properties are revalued to fair value with changes in the fair value recognised as income or expenses in the period that they arise. The properties are not depreciated. Rental revenue from the leasing of investment properties is recognised in the Operating Statement in the periods in which it is receivable, as this represents the pattern of service rendered through the provision of the properties. (n) Non Current Assets Classified as Held for Sale Non-current assets (and disposal groups) classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell, and are not subject to depreciation. Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset’s sale (or disposal group) is expected to be completed within one year from the date of classification. N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity 47 should ensure that their accounting policies are presented in their financial statements.
  • 51. ABC Health Service Notes to the Financial Statements 30 June 2009 (o) Depreciation and Amortisation Assets with a cost in excess of $1,000 (2007-08 and 2008-09) are capitalised and depreciation has been provided on depreciable assets so as to allocate their cost or valuation over their estimated useful lives using the straight-line method. Estimates of the remaining useful lives and depreciation method for all assets are reviewed at least annually. This depreciation charge is not funded by the Department of Human Services. The following table indicates the expected useful lives of non current assets on which the depreciation charges are based. 2009 2008 Buildings 30 to 40 Years 30 to 40 Years Plant & Equipment 8 to 10 Years 8 to 10 Years Medical Equipment 7 to 9 Years 7 to 9 Years Leased Assets 2 to 4 Years 2 to 4 Years (p) Net Gain/(Loss) on Non-Financial Assets Net gain/(loss) on non-financial assets includes realised and unrealised gains and losses from revaluations, impairments and disposals of all physical assets and intangible assets. Disposal of Non-Financial Assets Any gain or loss on the sale of non-financial assets is recognised at the date that control of the asset is passed to the buyer and is determined after deducting from the proceeds the carrying value of the asset at that time. Impairment of Non-Financial Assets Intangible assets with indefinite useful lives (and intangible assets not yet available for use) are tested annually for impairment (i.e. as to whether their carrying value exceeds their recoverable amount, and so require write-downs) and whenever there is an indication that the asset may be impaired. All other assets are assessed annually for indications of impairment, except for (delete items if not applicable to the entity): • inventories; • financial assets; • certain biological assets related to agricultural activity; • investment properties that are measured at fair value; • non-current physical assets held for sale; • assets arising from construction contracts. If there is an indication of impairment, the assets concerned are tested as to whether their carrying value exceeds their possible recoverable amount. Where an asset’s carrying value exceeds its recoverable amount, the difference is written-off as an expense except to the extent that the write-down can be debited to an asset revaluation reserve amount applicable to that class of asset. It is deemed that, in the event of the loss of an asset, the future economic benefits arising from the use of the asset will be replaced unless a specific decision to the contrary has been made. The recoverable amount for most assets is measured at the higher of depreciated replacement cost and fair value less costs to sell. Recoverable amount for assets held primarily to generate net cash inflows is measured at the higher of the present value of future cash flows expected to be obtained from the asset and fair value less costs to sell. N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity 48 should ensure that their accounting policies are presented in their financial statements.
  • 52. ABC Health Service Notes to the Financial Statements 30 June 2009 (q) Net Gain/(Loss) on Financial Instruments Net gain/(loss) on financial instruments includes realised and unrealised gains and losses from revaluations of financial instruments that are designated at fair value through profit or loss or held-for-trading, impairment and reversal of impairment for financial instruments at amortised cost, and disposals of financial assets. Revaluations of Financial Instruments at Fair Value The revaluation gain/(loss) on financial instruments at fair value excludes dividends or interest earned on financial assets, which is reported as part of income from transactions. Impairment of Financial Assets Bad and doubtful debts are assessed on a regular basis. Those bad debts considered as written off are classified as an expense. Financial Assets have been assessed for impairment in accordance with Australian Accounting Standards. Where a financial asset’s fair value at balance date has reduced by 20 per cent or more than its cost price; or where its fair value has been less than its cost price for a period of 12 or more months, the financial instrument is treated as impaired. In order to determine an appropriate fair value as at 30 June 2009 for its portfolio of financial assets, <ABC Health Service> obtained a valuation based on the best available advice using an estimated [insert appropriate valuation method] through a reputable financial institution. This value was compared against valuation methodologies provided by the issuer as at 30 June 2009. These methodologies were critiqued and considered to be consistent with standard market valuation techniques. Prices obtained from both sources were compared and were generally consistent with the full portfolio. The above valuation process was used to quantify the level of impairment on the portfolio of financial assets as at year end. (r) Payables These amounts consist predominantly of liabilities for goods and services. Payables are initially recognised at fair value, then subsequently carried at amortised cost and represent liabilities for goods and services provided to the health service prior to the end of the financial year that are unpaid, and arise when the health service becomes obliged to make future payments in respect of the purchase of these goods and services. The normal credit terms are usually Net 30 days. (s) Provisions Provisions are recognised when the entity has a present obligation, the future sacrifice of economic benefits is probable, and the amount of the provision can be measured reliably. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows. N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity 49 should ensure that their accounting policies are presented in their financial statements.
  • 53. ABC Health Service Notes to the Financial Statements 30 June 2009 (t) Resources Provided and Received Free of Charge or for Nominal Consideration Resources provided or received free of charge or for nominal consideration are recognised at their fair value when the transferee obtains control over them, irrespective of whether restrictions or conditions are imposed over the use of the contributions, unless received from another entity or agency as a consequence of a restructuring of administrative arrangements. In the latter case, such transfer will be recognised at carrying value. Contributions in the form of services are only recognised when a fair value can be reliably determined and the services would have been purchased if not donated. (u) Interest Bearing Liabilities Interest bearing liabilities in the Balance Sheet are recognised at fair value upon initial recognition. Subsequent to initial recognition, interest bearing liabilities are measured at amortised cost with any difference between the initial recognised amount and the redemption value being recognised in profit and loss over the period of the interest bearing liability using the effective interest rate method. Fair value is determined in the manner described in Note 23. (v) Functional and Presentation Currency The presentation currency of the <ABC Health Service> is the Australian dollar, which has also been identified as the functional currency of the entity. (w) Goods and Services Tax Income, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the balance sheet. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flow. Commitments and contingent assets and liabilities are presented on a gross basis. (x) Employee Benefits Wages and Salaries, Annual Leave, Sick Leave and Accrued Days Off Liabilities for wages and salaries, including non-monetary benefits, annual leave accumulating sick leave and accrued days off expected to be settled within 12 months of the reporting date are recognised in the provision for employee benefits in respect of employee’s services up to the reporting date, classified as current liabilities and measured at nominal values. Those liabilities that the entity are not expected to be settled within 12 months are recognised in the provision for employee benefits as current liabilities, measured at present N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity 50 should ensure that their accounting policies are presented in their financial statements.
  • 54. ABC Health Service Notes to the Financial Statements 30 June 2009 value of the amounts expected to be paid when the liabilities are settled using the remuneration rate expected to apply at the time of settlement. Long Service Leave Current Liability – unconditional LSL (representing 10 or more years of continuous service) is disclosed as a current liability even where the <ABC Health Service> does not expect to settle the liability within 12 months because it will not have the unconditional right to defer the settlement of the entitlement should an employee take leave within 12 months. The components of this current LSL liability are measured at: present value – component that the <ABC Health Service> does not expect to settle within 12 months; and nominal value – component that the <ABC Health Service> expects to settle within 12 months. Non-Current Liability – conditional LSL (representing less than 10 years of continuous service) is disclosed as a non-current liability. There is an unconditional right to defer the settlement of the entitlement until the employee has completed the requisite years of service. Conditional LSL is required to be measured at present value. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using interest rates of Commonwealth Government guaranteed securities in Australia. Superannuation Defined contribution plans Contributions to defined contribution superannuation plans are expensed when incurred. Defined benefit plans The amount charged to the Operating Statement in respect of defined benefit superannuation plans represents the contributions made by the entity to the superannuation plans in respect of the services of current entity staff. Superannuation contributions are made to the plans based on the relevant rules of each plan. Employees of the <ABC Health Service> are entitled to receive superannuation benefits and the <ABC Health Service> contributes to both the defined benefit and defined contribution plans. The defined benefit plan(s) provide benefits based on years of service and final average salary. The name and details of the major employee superannuation funds and contributions made by the <ABC Health Service> are as follows: Fund Contributions Paid or Payable for the year 2009 2008 $’000 $’000 Defined benefit plans: State Superannuation Fund – revised and new Other Defined contribution plans: VicSuper Other N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity 51 should ensure that their accounting policies are presented in their financial statements.
  • 55. ABC Health Service Notes to the Financial Statements 30 June 2009 Total The <ABC Health Service> does not recognise any unfunded defined benefit liability in respect of the superannuation plans because the entity has no legal or constructive obligation to pay future benefits relating to its employees; its only obligation is to pay superannuation contributions as they fall due. The Department of Treasury and Finance administers and discloses the State’s defined benefit liabilities in its financial report. Termination Benefits Liabilities for termination benefits are recognised when a detailed plan for the termination has been developed and a valid expectation has been raised with those employees affected that the terminations will be carried out. The liabilities for termination benefits are recognised in other creditors unless the amount or timing of the payments is uncertain, in which case they are recognised as a provision. On-Costs Employee benefits on-costs (payroll tax, workers compensation, superannuation, annual leave and LSL accrued while on LSL taken in service) are recognised separately from provisions for employee benefits. (y) Finance Costs Finance costs are recognised as expenses in the period in which they are incurred. Finance costs include: – interest on bank overdrafts and short-term and long-term borrowings; – amortisation of discounts or premiums relating to borrowings; – amortisation of ancillary costs incurred in connection with the arrangement of borrowings; and – finance charges in respect of finance leases recognised in accordance with AASB 117 Leases. (z) Residential Aged Care Service (Where the Residential Aged Care Service is an internal segment of the Health Service, not separately incorporated)1 The XXX Residential Aged Care Service operations are an integral part of the <ABC Health Service> and shares its resources. An apportionment of land and buildings has been made based on floor space. The results of the two operations have been segregated based on actual revenue earned and expenditure incurred by each operation in note 2b to the financial statement. The XXX Residential Aged Care has a separate Committee of Management and is substantially funded from Commonwealth bed-day subsidies. (Where a Residential Aged Care Service is separately incorporated a controlled entity relationship must be assessed as per AASB 127.) (aa) Joint Ventures Interests in jointly controlled assets are accounted for by recognising in the <ABC Health Service’s> financial statements, its share of assets, liabilities and any revenue and expenses of such joint ventures. Details of the joint venture are set out in note 27. N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity 52 should ensure that their accounting policies are presented in their financial statements.
  • 56. ABC Health Service Notes to the Financial Statements 30 June 2009 (ab) Intersegment Transactions Transactions between segments within the <ABC Health Service> have been eliminated to reflect the extent of the <ABC Health Service’s> operations as a group. (ac) Leases Leases of property, plant and equipment are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. Finance Leases Entity as lessor Rental income from operating lease is recognised on a straight-line basis over the term of the relevant lease. Entity as lessee Finance leases are recognised as assets and liabilities at amounts equal to the fair value of the lease property or, if lower, the present value of the minimum lease payment, each determined at the inception of the lease. The lease asset is depreciated over the shorter of the estimated useful life of the asset or the term of the lease. Minimum lease payments are allocated between the principal component of the lease liability, and the interest expense calculated using the interest rate implicit in the lease, and charged directly to the operating statement. Operating Leases Operating lease payments, including any contingent rentals, are recognised as an expense in the operating statement on a straight line basis over the lease term, except where another systematic basis is more representative of the time pattern of the benefits derived from the use of the leased asset. Lease Incentives All incentives for the agreement of a new or renewed operating lease shall be recognised as an integral part of the net consideration agreed for the use of the leased asset, irrespective of the incentive’s nature or form or the timing of payments. In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefits of incentives are recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Leasehold Improvements The cost of leasehold improvements are capitalised as an asset and depreciated over the remaining term of the lease or the estimated useful life of the improvements, whichever is the shorter. (ad) Income Recognition N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity 53 should ensure that their accounting policies are presented in their financial statements.
  • 57. ABC Health Service Notes to the Financial Statements 30 June 2009 Income is recognised in accordance with AASB 118 Revenue and is recognised as to the extent it is earned. Unearned income at reporting date is reported as income received in advance. Amounts disclosed as revenue are, where applicable, net of returns, allowances and duties and taxes. Government Grants Grants are recognised as income when the entity gains control of the underlying assets in accordance with AASB 1004 Contributions. For reciprocal grants, <ABC Health Service> is deemed to have assumed control when the performance has occurred under the grant. For non-reciprocal grants, <ABC Health Service> is deemed to have assumed control when the grant is received or receivable. Conditional grants may be reciprocal or non-reciprocal depending on the terms of the grant. Indirect Contributions – Insurance is recognised as revenue following advice from the Department of Human Services. – Long Service Leave (LSL) – Revenue is recognised upon finalisation of movements in LSL liability in line with the arrangements set out in the Metropolitan Health and Aged Care Services Division Hospital Circular 34/2008. Patient and Resident Fees Patient fees are recognised as revenue at the time invoices are raised. Private Practice Fees Private practice fees are recognised as revenue at the time invoices are raised. Donations and Other Bequests Donations and bequests are recognised as revenue when received. If donations are for a special purpose, they may be appropriated to a reserve, such as the specific restricted purpose reserve. Dividend Revenue Dividend revenue is recognised on a receivable basis. Interest Revenue Interest revenue is recognised on a time proportionate basis that takes in account the effective yield of the financial asset. (ae) Fund Accounting The <ABC Health Service> operates on a fund accounting basis and maintains three funds: Operating, Specific Purpose and Capital Funds. The <ABC Health Service’s> Capital and Specific Purpose Funds include unspent capital donations and receipts from fund-raising activities conducted solely in respect of these funds. (af) Services Supported By Health Services Agreement and Services Supported By Hospital and Community Initiatives Activities classified as Services Supported by Health Services Agreement (HSA) are substantially funded by the Department of Human Services and includes Residential Aged Care Services (RACS) and are also funded from other sources such as the Commonwealth, patients and residents, while Services Supported by Hospital and N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity 54 should ensure that their accounting policies are presented in their financial statements.
  • 58. ABC Health Service Notes to the Financial Statements 30 June 2009 Community Initiatives (Non HSA) are funded by the Health Service's own activities or local initiatives and/or the Commonwealth. (ag) Change in Accounting Policies In accordance with Victorian Government Financial Reporting Direction 103D ‘Non-Current Physical Assets’, <ABC Health Service> measures plant and equipment, and medical equipment assets at fair value from 1 July 2008. Previously these assets were measured at cost. This change in accounting policy is required to ensure that Victoria’s Whole of Government financial report, to which <ABC Health Service> is consolidated into, complies with the requirements of AASB1049 Whole of Government and General Government Sector Financial Reporting. As this change is the initial application of a policy to revalue assets in accordance with AASB116 Property, Plant and Equipment the change is treated as a revaluation in the current year. (ah) Comparative Information Where necessary the previous year’s figures have been reclassified to facilitate comparisons. (When comparative amounts are reclassified, disclose: (a) the nature of the classification; (b) the amount of each item or class of items that is reclassified; and (c) the reason for the classification. When it is impracticable to reclassify comparative amounts, disclose: (d) the reason for not reclassifying the amounts; and (e) the nature of the adjustments that would have been made if the amounts had been reclassified.) (ai) Amalgamations and Mergers Assets and liabilities of the acquired (amalgamated) entities are taken up at book value at date of acquisition (amalgamation). Crown assets acquired remain the property of the Crown, however they are reported as assets of the entity, because effective control passes to the entity along with a substantial benefit. (This note only applies for the first year of integration.) (aj) Property, Plant & Equipment Revaluation Reserve The asset revaluation reserve is used to record increments and decrements on the revaluation of non-current assets. (ak) Financial Asset Available-for-Sale Revaluation Reserve The available-for-sale revaluation reserve arises on the revaluation of available-for-sale financial assets. Where a revalued financial asset is sold that portion of the reserve which relates to that financial asset is effectively realised, and is recognised in the operating statement. Where a revalued financial asset is impaired that portion of the reserve which relates to that financial asset is recognised in the operating statement. (al) General Reserves N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity 55 should ensure that their accounting policies are presented in their financial statements.
  • 59. ABC Health Service Notes to the Financial Statements 30 June 2009 (Details of the nature and purpose of any such reserves.) (am)Specific Restricted Purpose Reserve A specific restricted purpose reserve is established where the entity has possession or title to the funds but has no discretion to amend or vary the restriction and/or condition underlying the funds received. (an)Contributed Capital Consistent with Australian Accounting Interpretation 1038 Contributions by Owners Made to Wholly-Owned Public Sector Entities and FRD 119 Contributions by Owners, appropriations for additions to the net asset base have been designated as contributed capital. Other transfers that are in the nature of contributions or distributions that have been designated as contributed capital are also treated as contributed capital. (ao) Net Result Before Capital & Specific Items The subtotal entitled ‘Net result Before Capital & Specific Items’ is included in the Operating Statement to enhance the understanding of the financial performance of <ABC Health Service>. This subtotal reports the result excluding items such as capital grants, assets received or provided free of charge, depreciation, and items of an unusual nature and amount such as specific revenues and expenses. The exclusion of these items are made to enhance matching of income and expenses so as to facilitate the comparability and consistency of results between years and Victorian Public Health Services. The Net result Before Capital & Specific Items is used by the management of <ABC Health Service>, the Department of Human Services and the Victorian Government to measure the ongoing result of Health Services in operating hospital services. Capital and specific items, which are excluded from this sub-total, comprise:  Capital purpose income, which comprises all tied grants, donations and bequests received for the purpose of acquiring non-current assets, such as capital works, plant and equipment or intangible assets. It also includes donations of plant and equipment (refer note 1 (t)). Consequently the recognition of revenue as capital purpose income is based on the intention of the provider of the revenue at the time the revenue is provided.  Specific income/expense, comprises the following items, where material: o Voluntary departure packages o Write-down of inventories o Non-current asset revaluation increments/decrements o Diminution in investments o Restructuring of operations (disaggregation/aggregation of health services) o Litigation settlements o Non-current assets lost or found o Forgiveness of loans o Reversals of provisions o Voluntary changes in accounting policies (which are not required by an accounting standard or other authoritative pronouncement of the Australian Accounting Standards Board) N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity 56 should ensure that their accounting policies are presented in their financial statements.
  • 60. ABC Health Service Notes to the Financial Statements 30 June 2009  Impairment of financial and non-financial assets, includes all impairment losses (and reversal of previous impairment losses), which have been recognised in accordance with note 1 (p) and (q)  Depreciation and amortisation, as described in note 1 (k) and (o)  Assets provided or received free of charge, as described in note 1 (t)  Expenditure using capital purpose income, comprises expenditure which either falls below the asset capitalisation threshold (note 1 (j) and (k), or doesn’t meet asset recognition criteria and therefore does not result in the recognition of an asset in the balance sheet, where funding for that expenditure is from capital purpose income (ap) Category Groups The <ABC Health Service> has used the following category groups for reporting purposes for the current and previous financial years. Admitted Patient Services (Admitted Patients) comprises all recurrent health revenue/expenditure on admitted patient services, where services are delivered in public hospitals, or free standing day hospital facilities, or alcohol and drug treatment units or hospitals specialising in dental services, hearing and ophthalmic aids. Mental Health Services (Mental Health) comprises all recurrent health revenue/expenditure on specialised mental health services (child and adolescent, general and adult, community and forensic) managed or funded by the state or territory health administrations, and includes: Admitted patient services (including forensic mental health), outpatient services, emergency department services (where it is possible to separate emergency department mental health services), community-based services, residential and ambulatory services. Outpatient Services (Outpatients) comprises all recurrent health revenue/expenditure on public hospital type outpatient services, where services are delivered in public hospital outpatient clinics, or free standing day hospital facilities, or rehabilitation facilities, or alcohol and drug treatment units, or outpatient clinics specialising in ophthalmic aids or palliative care. Emergency Department Services (EDS) comprises all recurrent health revenue/expenditure on emergency department services that are available free of charge to public patients. Aged Care comprises revenue/expenditure form Home and Community Care (HACC) programs, allied Health, Aged Care Assessment and support services. Primary Health comprises revenue/expenditure for Community Health Services including health promotion and counselling, physiotherapy, speech therapy, podiatry and occupational therapy. Off Campus, Ambulatory Services (Ambulatory) comprises all recurrent health revenue/ expenditure on public hospital type services including palliative care facilities and rehabilitation facilities, as well as services provided under the following agreements: Services that are provided or received by hospitals (or area health services) but are N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity 57 should ensure that their accounting policies are presented in their financial statements.
  • 61. ABC Health Service Notes to the Financial Statements 30 June 2009 delivered/received outside a hospital campus, services which have moved from a hospital to a community setting since June 1998, services which fall within the agreed scope of inclusions under the new system, which have been delivered within hospital’s i.e. in rural/remote areas. Residential Aged Care including Mental Health (RAC incl. Mental Health) referred to in the past as psychogeriatric residential services, comprises those Commonwealth-licensed residential aged care services in receipt of supplementary funding from DHS under the mental health program. It excludes all other residential services funded under the mental health program, such as mental health funded community care units (CCUs) and secure extended care units (SECs). Other Services excluded from Australian Health Care Agreement (AHCA) (Other) comprises revenue/expenditure for services not separately classified above, including: Public health services including Laboratory testing, Blood Borne Viruses / Sexually Transmitted Infections clinical services, Kooris liaison officers, immunisation and screening services, Drugs services including drug withdrawal, counselling and the needle and syringe program, Dental Health services including general and specialist dental care, school dental services and clinical education, Disability services including aids and equipment and flexible support packages to people with a disability, Community Care programs including sexual assault support, early parenting services, parenting assessment and skills development, and various support services. Health and Community Initiatives also falls in this category group. (aq) New Accounting Standards and Interpretations Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2009 reporting period. As at 30 June 2009, the following standards and interpretations had been issued but were not mandatory for financial years ending 30 June 2009. <ABC Health Service> has not and does not intend to adopt these standards early. Standard / Interpretation Summary Applicable Impact on Entities for reporting Annual Statements periods beginning on or ending on AASB 8 Operating Supersedes AASB 114 Beginning 1 Not applicable Segments. Segment Reporting. January 2009 AASB 2007-3 Amendments An accompanying amending Beginning 1 Impact expected to be to Australian Accounting standard, also introduced January 2009 not significant. Standards arising from consequential amendments AASB 8 [AASB 5, AASB 6, into other Standards. AASB 102, AASB 107, AASB 119, AASB 127, AASB 134, AASB 136, AASB 1023 and AASB 1038] AASB 2007-6 Amendments An accompanying amending Beginning 1 All Australian to Australian Accounting standard, also introduced January 2009 government jurisdictions Standards arising from consequential amendments are currently still actively AASB 123 [AASB 1, AASB into other Standards. pursuing an exemption 101, AASB 107, AASB 111, for government from AASB 116 & AASB 138 and capitalising borrowing Interpretations 1 & 12] costs. N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity 58 should ensure that their accounting policies are presented in their financial statements.
  • 62. ABC Health Service Notes to the Financial Statements 30 June 2009 Standard / Summary Applicable for Impact on Entities Interpretation reporting Annual Statements periods beginning on or ending on AASB 2008-3 Amendments to This Standard gives effect to Beginning 1 Impact expected to be AAS arising from AASB 3 & consequential changes January 2009 insignificant. AASB 127 [AASB 1, 2, 4, 5, 7, arising from revised AASB 3 101, 107, 112, 114, 116, and amended AASB 127. 121, 128, 131, 132, 133, The Prefaces to those 134, 136, 137, 138 & 139 and Standards summarise the Interpretation 9 & 107] main requirements of those Standards. AASB 2008-5 Amendments to A suite of amendments to Beginning 1 Impact is being AASs arising from the Annual existing standards following January 2009 evaluated. Improvements Project [AASBs issuance of IASB Standard 5, 7, 101, 102, 107, 108, Improvements to IFRSs in 110, 116, 118, 119, 120, May 2008. Some 123, 127, 128, 129, 131, amendments result in 132, 134, 136, 138, 140, accounting changes for 141, 1023 & 1308] presentation, recognition and measurement purposes. AASB 2008-6 Further The amendments require all Beginning 1 Impact expected to be Amendments to Australian the assets and liabilities of a January 2009 insignificant. Accounting Standards arising for-sale subsidiary’s to be from the Annual classified as held for sale Improvements project [AASB and clarify the disclosures 1 & AASB 5] required when the subsidiary is part of a disposal group that meets the definition of a discontinued operation. AASB 2008-7 Amendments to Changes mainly relate to Beginning 1 Impact expected to be AAS Cost of an Investment in treatment of dividends from January 2009 insignificant. a Subsidiary, Jointly subsidiaries or controlled Controlled Entity or Associate entities [AASB 1, AASB 118, AASB 121, AASB 127 & AASB 136] AASB 2008-8 Amendments to The amendments to AASB Beginning 1 Impact is being Australian Accounting 139 clarify how the January 2009 evaluated. Standards – Eligible Hedged principles that determine Items [AASB 139] whether a hedged risk or portion of cash flows is eligible for designation as a hedged item, should be applied in particular situations. AASB 2008-9 Amendments to Amendments to AASB 1049 Beginning 1 Impact expected to be AASB 1049 for Consistency for consistency with AASB January 2009 insignificant with AASB 101 101 (September 2007) version. AASB 2009-1 Amendments to Amendments to Australian Beginning 1 Impact expected to be Australian Accounting Accounting Standards to January 2009 insignificant Standards – Borrowing Costs allow borrowing costs of of Not-for-Profit Public Sector Not-for Profit Public Sector Entities [AASB 1, AASB 111 & Entities to be expensed AASB 123] AASB 2009-2 Amendments to Amendments to AASB 7 to Beginning 1 Impact expected to be Australian Accounting enhance disclosures about January 2009 insignificant Standards – Improving fair value measurements Disclosures about Financial and liquidity risk. Editorial Instruments [AASB 4, AASB amendments to AASB 4, 7, AASB 1023 & AASB 1038] AASB 1023 and AASB 1038 resulting from the amendments to AASB 7 N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity 59 should ensure that their accounting policies are presented in their financial statements.
  • 63. ABC Health Service Notes to the Financial Statements 30 June 2009 Commentary - Summary of Significant Accounting Policies The accounting policies illustrated above are commonly required examples only, and do not necessarily represent the only treatment which may be appropriate for the item concerned and do not cover all items that may be considered for inclusion in the summary of accounting policies. a) Note 1 to the financial statements, which is the statement of accounting policies, should disclose in detail significant accounting principles and policies applied in preparing the financial statements. It should be stated that the financial statements are general purpose financial statements and that they adhere to the Financial Management Act 1994, Accounting Standards issued by the Australian Accounting Standards Board and Urgent Issues Group Interpretations. b) An accounting policy is material or significant if its omission, non-disclosure or mis-statement would cause the financial statements to mislead users when making evaluations or decisions. c) The entity should include sufficient notes to provide explanatory material so as to present fairly the financial statements of the entity. d) Any changes in accounting policies which materially affect the financial statements for the reporting period should be disclosed in a note stating the: – nature of the change; – reason (s) for the change; and – financial effect of the change. e) Any change in accounting policy which does not have a material effect on the financial statements for the reporting period but which may have a significant effect on the financial statements in subsequent periods should be disclosed in a note which states the: – nature of the change; – reason(s) for the change; – change does not materially effect the current reporting period; and – financial effect of the change in subsequent years. f) The statement of accounting policies should include disclosure of: • The overall valuation policy for each class of assets, date of last valuation, name and qualifications of valuer. • The method of inventory valuation, for example: – first-in, first-out (FIFO); – weighted average cost. • The depreciation policy adopted. • The basis of accounting for employee benefits. • The policy for disclosure of superannuation and accounting for superannuation costs. • The basis for distinguishing between capital funds, funds held for restricted purposes, funds held in perpetuity and operating funds. • The method of accounting for leases. • The treatment of assets and liabilities acquired during the fiscal year in association with either the integration of psychiatric services or amalgamation of health services. • Principles of consolidation. N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity 60 should ensure that their accounting policies are presented in their financial statements.
  • 64. ABC Health Service Notes to the Financial Statements 30 June 2009 • The basis of accounting for investments. • The policy of capitalisation and measurement of intangible assets, including patents, trademarks, goodwill and development costs. New Accounting Standards and Interpretations Australian Accounting Standards Issued but not yet effective When an entity has not applied a new Australian Accounting Standard that has been issued but is not yet effective, the entity shall disclose: (a) this fact: and (b) known or reasonably estimable information relevant to assessing the possible impact that application of the new Australian Accounting Standard will have on the entities financial report in the period of initial application. In complying with the requirement above, a entity considers disclosing: (a) the title of the new Australian Accounting Standard; (b) the nature of the impending change or changes in accounting policy; (c) the date by which application of the standard is required; (d) the date as at which it plans to apply the standard initially; and (e) either: i. discussion of the impact that initial application of the Standard is expected to have on the entities financial report; or ii. if that impact is not known or reasonably estimable, a statement to that effect The disclosures as described above must be made even if the impact on the entity is not expected to be material. However, there is no need to mention a standard or interpretation if it is clearly not applicable to the entity. Materiality In accordance with Accounting Standard AASB 1031 Materiality, accounting policies need only be identified in the summary of accounting policies where they are considered ‘material’. Accounting policies will be considered material if their omission, misstatement or non-disclosure has the potential, individually or collectively, to: a) Influence the economic decisions of users taken on the basis of the financial report; and b) Affect the discharge of accountability by the management or governing body of the entity. Additional Statement In the basis of preparation section the following statement must be included only when relevant. ‘Judgments made by management in the application of AAS that have significant effects on the financial statements and estimates with a significant risk of material adjustments in the next year are disclosed throughout the notes in the financial statements.’ Going Concern Should a letter of comfort be received from DHS the Health Service should include in note 1 a section titled ‘Going Concern’ which should detail that the statements have been prepared on a going concern basis and relevant details from the letter of comfort. N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity 61 should ensure that their accounting policies are presented in their financial statements.
  • 65. ABC Health Service Notes to the Financial Statements 30 June 2009 Comparative Amounts When the presentation or classification of items in the financial report is amended, comparative amounts shall be reclassified unless the reclassification is impracticable. When comparative amounts are reclassified, an entity shall disclose: (a) the nature of the reclassification; (b) the amount of each item or class of items that is reclassified; and (c) the reason for the reclassification. When it is impracticable to reclassify comparative amounts, disclose: (d) the reason for not reclassifying the amounts; and (e) the nature of the adjustments that would have been made if the amounts had been reclassified.) N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity 62 should ensure that their accounting policies are presented in their financial statements.
  • 66. ABC Health Service Notes to the Financial Statements 30 June 2009 N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity should ensure that their accounting policies are 63 presented in their financial statements.
  • 67. ABC Health Service Notes to the Financial Statements 30 June 2009 64 N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity should ensure that their accounting policies are presented in their financial statements.
  • 68. ABC Health Service Notes to the Financial Statements 30 June 2009 Commentary – Note 2: Services Supported By Health Services Agreement and Services Supported By Hospital And Community Initiatives This enables distinction to be drawn in relation to flows of funds between those relating to activities undertaken at the behest of government and those undertaken as a result of hospital and local community initiatives. Refer to page 24 for guidance on classification of HSA and non-HSA transactions. Although in some cases the distinction between the two sectors may not be immediately apparent, health service managers should ensure that those items that are reported under each sector are based on definitions contained in the Finance and Accounting Manual/AIMS guidelines. Evidence will need to be available for audit purposes to substantiate the basis for classifying items in a particular way. It is also necessary when arriving at the above classification of revenue that full costs associated with Services Supported by Hospitals and Community Initiatives are brought to account. For example salary overheads, asset utilisation and administration. Health services need to continue complying with the current reporting format to ensure the Department can complete the AHCA Acquittal and avoid financial penalties under the Agreement. The main category groups are: • Admitted Patient Services (Admitted Patients) comprises all recurrent health revenue on admitted patient services, where services are delivered in:  Public hospitals  Free standing day hospital facilities  Alcohol and drug treatment units  Hospitals specialising in dental services, hearing and ophthalmic aids This category also includes recurrent health revenue on admitted patient services where service delivery is contracted to private hospitals or treatment facilities, as well as recurrent funds for scope patient transport, training, research and telemedicine where it relates to admitted patient services. This category excludes revenue/expenditure on designated mental health services. The following cost centres from the Common Chart of Account Codes (CCAO) should be allocated here:  A0000 – Acute wards – multi day  A3000 – Acute wards – same day  A4000 – Clinical units  A8000 – Operational theatre suites  A8500 – Acute inpatients  M2002–2100 – Dental health (inpatients) • Outpatient Services (Outpatients) comprises all recurrent health revenue on public hospital type outpatient services, where services are delivered in:  Public hospital outpatient clinics  Free standing day hospital facilities  Rehabilitation facilities N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity 65 should ensure that their accounting policies are presented in their financial statements.
  • 69. ABC Health Service Notes to the Financial Statements 30 June 2009  Alcohol and drug treatment units  Outpatient clinics specialising in ophthalmic aids or palliative care This category includes recurrent health revenue for scope patient transport, training, research and telemedicine where it relates to outpatient services. This category excludes revenue on emergency department and community-based services, as well as designated mental health services. The following cost centre from the CCOA should be allocated here:  C0000 – Non-admitted patient services • Emergency Department Services (EDS) comprises all recurrent health revenue on emergency department services that are available free of charge to public patients. This category includes recurrent health expenditure/revenue for scope patient transport, training, research and telemedicine where it relates to emergency department services. The following cost centre from the CCOA should be allocated here:  B0000 - Emergency • Off Campus, Ambulatory Services (Ambulatory) comprises all recurrent health revenue on public hospital type services including palliative care facilities and rehabilitation facilities, as well as services provided under the following agreements:  Services that are provided or received by hospitals (or area health services) but are delivered/received outside a hospital campus  Services which have moved from a hospital to a community setting since June 1998  Services which fall within the agreed scope of inclusions under the new system, which have never been delivered within hospitals i.e. in rural/remote regions This category includes recurrent health revenue for scope patient transport, training, research and telemedicine where it relates to off-campus, ambulatory services. This category excludes recurrent health revenue on designated mental health services. The following cost centres from the CCOA should be allocated here:  D0000 – Other acute health funded services  F0000 – Sub acute services • Mental Health Services (Mental Health) comprises all recurrent health revenue on specialised mental health services (child and adolescent, general and adult, community and forensic) managed or funded by the state or territory health administrations, and includes:  Admitted patient services (including forensic mental health)  Outpatient services  Emergency department services (where it is possible to separate emergency department mental health services)  Community-based services  Residential and ambulatory services This category may align with recurrent health revenue reported under the National Survey of Mental Health Services. The following cost centre from the CCOA should be allocated here:  H0000 – Mental health other 66 N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity should ensure that their accounting policies are presented in their financial statements.
  • 70. ABC Health Service Notes to the Financial Statements 30 June 2009 Residential Aged Care including Mental Health (RAC Mental Health), referred to in the past as psychogeriatric residential services, comprises those Commonwealth- licensed residential aged care services in receipt of supplementary funding from DHS under the mental health program. It excludes all other residential services funded under the mental health program, such as mental health-funded community care units (CCUs) and secure extended care units (SECUs). The following cost centres from the CCOA should be allocated here:  H8700 – Mental health residential care  J0000 – Aged care residential low care  J2000 – Aged care residential high care • Aged Care comprises revenue for Home and Community Care (HACC) programs, Allied Health, Aged Care Assessment and support services. The following cost centres from the CCOA should be allocated here:  J5000 – Home & Community Care (HACC)  J7000 – Aged care other • Primary Health comprises revenue for Community Health Services including health promotion and counselling, physiotherapy, speech therapy, podiatry and occupational therapy. The following cost centre from the CCOA should be allocated here:  L0000 – Primary health • Other Services Excluded from AHCA (Other) comprises revenue for services not separately classified above, including:  Public Health Services including Laboratory testing, Blood Borne Viruses/ Sexually Transmitted Infections clinical services, Koori Health liaison officers, immunisation and screening services.  Drugs Services including drug withdrawal, counselling and the needle and syringe program.  Dental Health Services including general and specialist dental care, school dental services and clinical education.  Disability Services including aids and equipment and flexible support packages to people with a disability.  Community Care programs including sexual assault support, early parenting services, parenting assessment and skills development, and various support services.  Health and Community Initiatives. The following cost centres from the CCOA should be allocated here:  M0000 – Drug prevention services  M1000 – Disability services  M1500 – Public health  M2202-2300 – Dental health (community)  M2302-2400 – Dental health (other)  M4000 – Other programs  M5000 – Department funded research  M8500 – Other programs The costs accounted for in the following cost centres must be allocated appropriately to the above-mentioned programs  N0000 – Pharmacy  N2000 – Allied health services  N8500 – Clinical services  P0000 – Clinical support N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity 67 should ensure that their accounting policies are presented in their financial statements.
  • 71. ABC Health Service Notes to the Financial Statements 30 June 2009  R0000 – Infrastructure services  R1000 – Corporate services  Y0000 – Diagnostic laboratory services  Y1000 – Medical imaging services Internal and Restricted Specific Purposes Revenue Internally Managed Specific Purpose Funds Internally managed specific purpose funds are funds established, managed and controlled by the Board of Management. The Board has control over every aspect of these funds including the specific purposes for which these funds are established. Examples of internally managed specific funds include fund-raising activities, commercial ventures (eg. shops, linen services, café, etc), departmental fund and specific projects. Restricted Specific Purpose Funds These funds are established for a particular or specific purpose (that is, a restriction or condition) through some form of legal instrument such as a trust or legal undertaking to comply with the condition or purpose for which the fund is established. The common types would be donations provided to purchase specified equipment and research grants provided for a particular field of interest. A separate board or a separate committee normally manages the fund such as a foundation managed by a separate board. Alternatively, this could be managed by a management auxiliary to the health service’s Board. The health service’s Board has no effective control on the restricted purpose SPF other than to comply with or to implement the purpose for which the fund is set up. Business Units The only Business Units are Pathology Services (Diagnostic Laboratory) and Radiology Services (Medical Imaging) nothing else is to be classified as Business Units. These business units MUST be reported under the HSA section of the revenue and expenses notes. Donations All donations are recognised as income when received. Where health services receive general donations (i.e. the donor has not specified conditions with respect to disbursement), these amounts shall be recorded as income under services supported by Health Services Agreement. For example, donations collected from the ’Accident and Emergency’ area should be recorded under other income against the acute health program. If conditions have been specified they should be recorded as revenue under services supported by Hospital and Community Initiatives. Where donations are received for the purpose of acquiring non-current assets such as plant and equipment they should be reported under capital purpose income in the Operating Statement. Commonwealth Government Grants Commonwealth Government – Residential Aged Care Subsidy: includes residential care subsidy (CCOA 51501-51599), residential aged care accommodation supplements (CCOA 51601-51699) and other supplements (CCOA 51801-51899). Commonwealth Government – Other: includes any others grants from the Commonwealth apart from residential aged care. 68 N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity should ensure that their accounting policies are presented in their financial statements.
  • 72. ABC Health Service Notes to the Financial Statements 30 June 2009 Calculation of Patient and Resident Fees Raised Patient and resident fees raised is calculated by adding unbilled fees for patients not discharged at year end to fees billed to date less fees accrued in the previous year. Care should be taken to ensure that fees are identified against the correct program. For example, prosthesis revenue should be included in the Acute inpatient revenue. This ensures the disclosure of patient and resident fees raised complies with this note. Commentary - Assets Received Free of Charge The revenues and assets recognised as a result of such transactions shall be measured at the fair value of resources received. Commentary – Specific Income When an item of revenue from ordinary activities is of such a size, nature or incidence that its disclosure is relevant in explaining the financial performance of the entity for the reporting period, its nature and amount must be disclosed separately in the notes in the financial report (refer to AASB 101 (86)). Some of the circumstances which may give rise to the separate disclosure of the nature and amount of revenues in accordance with the above paragraph include: (a) the write-down of inventories or non-current assets and, where applicable, the reversal of such write-downs; (b) litigation settlements; (c) reversals of provisions; (d) restructuring of operations; (e) disposals of items of property, plant and equipment; (f) disposals of investments; (g) changes in accounting policies, other than those changes made to comply with a Standard or an Australian Interpretation that requires initial adjustments to be recognised as a direct credit to equity or a direct debit to equity. Please note that DHS LSL contribution should not be reported under Specific Income. This should be included in Note 2a under Indirect Contributions from DHS. N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity 69 should ensure that their accounting policies are presented in their financial statements.
  • 73. ABC Health Service Notes to the Financial Statements 30 June 2009 70 N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity should ensure that their accounting policies are presented in their financial statements.
  • 74. ABC Health Service Notes to the Financial Statements 30 June 2009 Commentary – Note 3: Services Supported By Health Services Agreement and Services Supported By Hospital And Community Initiatives This enables distinction to be drawn in relation to flows of funds between those relating to activities undertaken at the behest of government and those undertaken as a result of hospital and local community initiatives. Refer to page 24 for guidance on classification of HSA and non-HSA transactions. Although in some cases the distinction between the two sectors may not be immediately apparent, health service managers should ensure that those items that are reported under each sector are based on definitions contained in the Finance and Accounting Manual/AIMS guidelines. Evidence will need to be available for audit purposes to substantiate the basis for classifying items in a particular way. It is also necessary when arriving at the above classification of expenditure that full costs associated with Services Supported by Hospitals and Community Initiatives are brought to account. For example salary overheads, asset utilisation and administration. Health services need to continue complying with the current reporting format to ensure the Department can complete the AHCA Acquittal and avoid financial penalties under the Agreement. The main category groups are:  Admitted Patient Services (Admitted Patients)  Outpatient Services (Outpatients)  Emergency Department Services (EDS)  Off Campus, Ambulatory Services (Ambulatory)  Mental Health Services (Mental Health)  Residential Aged Care including Mental Health (RAC Mental Health),  Aged Care  Primary  Other Services Excluded from AHCA (Other) Descriptions of these category groups can be found on pages 70-73. References to revenue/income within the descriptions on pages 70-73 should be replaced with expenses where appropriate. Internal and Restricted Specific Purposes Revenue Internally Managed Specific Purpose Funds Internally managed specific purpose funds are funds established, managed and controlled by the Board of Management. The Board has control over every aspect of these funds including the specific purposes for which these funds are established. Examples of internally managed specific funds include fund-raising activities, commercial ventures (eg. shops, linen services, café, etc), departmental fund and specific projects. Restricted Specific Purpose Funds These funds are established for a particular or specific purpose (that is, a restriction or N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity 71 should ensure that their accounting policies are presented in their financial statements.
  • 75. ABC Health Service Notes to the Financial Statements 30 June 2009 condition) through some forms of legal instrument such as a trust or legal undertaking to comply with the condition or purpose for which the fund is established. The common types would be donation provided to purchase a specified equipment and research grant provided for particular field of interest. A separate board or a separate committee normally manages the fund such as a foundation managed by a separate board. Alternatively, this could be managed by a management auxiliary to the health service’s Board. The health service’s Board has no effective control on the restricted purpose SPF other than to comply with or to implement the purpose for which the fund is set up. Business Units The only Business Units are Pathology Services (Diagnostic Laboratory) and Radiology Services (Medical Imaging) nothing else is to be classified as Business Units. These business units MUST be reported under the HSA section of the revenue and expenses notes Repairs and Maintenance Health services are reminded that repairs and maintenance refers to activity aimed at maintaining or returning an asset to its usual service potential. Such expenditure is recognised as an expense when it does not increase the level of economic benefits that will flow to the entity in future periods. For example, the repair cost incurred in rectifying a breakdown of an item of equipment, plant or vehicle is treated as an expense. However, the replacement of major components of an asset may be capitalised as assets if such replacement satisfies the requirements of AASB 116, paragraphs 7 and 13. The current recommended threshold for recognition of a non-current physical asset is $1,000 or more as per Finance and Accounting Manual – Public Hospitals, 1996 – Capitalisation Policy. Items of Expenses and Losses Arising from Financial Instruments Health services shall disclose items of expense, gains and losses either in this note or on the face of the operating statement. Please refer to AASB 7 disclosure requirements for items of expenses and losses arising from financial instruments. Commentary – Specific Expenses When a expense from ordinary activities is of such a size, nature or incidence that its disclosure is relevant in explaining the financial performance of the entity for the reporting period, its nature and amount must be disclosed separately in the notes in the financial report (refer to AASB 101 (86)). Some of the circumstances which may give rise to the separate disclosure of the nature and amount of expenses in accordance with the above paragraph include: (a) the write-down of inventories or non-current assets and, where applicable, the reversal of such write-downs; (b) litigation settlements; 72 N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity should ensure that their accounting policies are presented in their financial statements.
  • 76. ABC Health Service Notes to the Financial Statements 30 June 2009 (c) reversals of provisions; (d) restructuring of operations; (e) disposals of items of property, plant and equipment; (f) disposals of investments; (g) changes in accounting policies, other than those changes made to comply with a Standard or an Australian Interpretation that requires initial adjustments to be recognised as a direct credit to equity or a direct debit to equity. Voluntary Departure Packages/Targeted Separation Packages To be classified as an item under Specific Expenses, if their size and effect has a material impact on the results, as they effectively represent salary expenses which are an ordinary operating outgoing and result from a management decision to reduce staff rather than from some external effect. However, any payment made for long service leave which has already been provided for by way of an accrued liability should be treated as a reduction of the liability and not recorded as a specific expense. Commentary – Depreciation and Amortisation Depreciation Depreciation is generally provided on a straight-line basis at rates calculated to allocate the cost or valuation of an asset, less any estimated residual value over its estimated ‘useful life’ (refer AASB 116 Property, Plant and Equipment). It is calculated for all controlled/owned depreciable physical assets. N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity 73 should ensure that their accounting policies are presented in their financial statements.
  • 77. ABC Health Service Notes to the Financial Statements 30 June 2009 The useful lives illustrated in the guidelines are for illustrative purposes only. Entities should determine the useful lives of assets by consideration of the nature and characteristics of specific assets. Amortisation Amortisation is generally provided on assets that are leased and is calculated in accordance with AASB 117 Leases. If an entity has items such as patents, trademarks, computer software or development expenses that are being amortised, these should be included under ‘Intangible Assets’ (refer AASB 138 Intangible Assets). 74 N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity should ensure that their accounting policies are presented in their financial statements.
  • 78. ABC Health Service Notes to the Financial Statements 30 June 2009 Commentary – Finance Costs Finance costs must be disclosed separately on the Operating Statement as per AASB 101 Presentation of Financial Statements and should be reported according to the requirements in AASB 123 Borrowing Costs and FRD 105 Borrowing Costs. AASB 123 requires the immediate expensing of finance costs but allows as an alternative treatment, the capitalisation of finance costs that are directly attributable to the acquisition, construction or production of a qualifying asset. However, FRD 105 limits the choice available under AASB 123 by requiring all finance costs to be expensed in the period incurred. N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity 75 should ensure that their accounting policies are presented in their financial statements.
  • 79. ABC Health Service Notes to the Financial Statements 30 June 2009 Commentary – Cash and Cash Equivalents Cash Assets include cash on hand and cash equivalents, where; • Cash on hand means notes and coins held, and deposits held at call with a financial institution; and • Cash equivalents means highly liquid investments with short periods to maturity which are readily convertible to cash on hand and are subject to an insignificant risk of changes in value. • The cash equivalents are restrictive as to maturity periods, and risk of changes in value. A short period to maturity generally means that an investment qualifies as a cash equivalent only when it has a maturity of three months or less from the date of acquisition. Note: The total for line item ‘Cash for Health Service Operations’ must agree with line item ‘Cash at 30 June 2009’ in the Cash Flow Statement. 76 N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity should ensure that their accounting policies are presented in their financial statements.
  • 80. ABC Health Service Notes to the Financial Statements 30 June 2009 Commentary- Receivables Receivables are to be recorded at the amounts expected to be ultimately collected in cash and, therefore, net of any provision for bad and doubtful debts. This is to include accrued investment income. Receivables (DHS-Long Service Leave): Entities are required to disclose the amount of non-cash services delivered in respect of Long Service Leave movements as set out in Hospital Circular 34/2008 issued on 19 November 2008. Accounting For Long Service Leave. The application of this publication would result in the recognition of the amount of non-cash services delivered as a receivable from DHS and non- cash revenue from services provided. Statutory Receivables: Assets that are not contractual (such as assets that arise as a result of statutory requirements), are not financial assets. Therefore, although these assets are similar to financial instruments, they are in fact not within the scope of AASB 7. However, entities who wish to apply requirements from AASB 7 to such assets may do so at their own discretion. Financial Instruments Disclosures Significance of financial instruments AASB 7 requires an entity to disclose information that enables users of a financial report to evaluate the significance of financial instruments for its financial position and performance. Allowance account for credit losses When financial assets are impaired by credit losses and the entity records the impairment in a separate account rather than directly reducing the carrying amount of the asset, it shall disclose a reconciliation of changes in that account during the period for each class of financial assets. Nature and extent of risks arising from financial instruments An entity shall also disclose information that enables users of its financial report to evaluate the nature and extent of risks arising from financial instruments to which the entity is exposed at the reporting date. N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity 77 should ensure that their accounting policies are presented in their financial statements.
  • 81. ABC Health Service Notes to the Financial Statements 30 June 2009 78 N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity should ensure that their accounting policies are presented in their financial statements.
  • 82. ABC Health Service Notes to the Financial Statements 30 June 2009 Commentary – Other Financial Assets The entity can classify its other financial assets into the following categories: financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, and available-for-sale financial assets. The classification depends on the purpose for which the investments were acquired. Clarification of the classification of financial assets into the four categories is prescribed by FRD114A ‘Financial Instruments – General Government Entities and Public Non Financial Corporations’. Should a category other than available for sale be utilised, the entity must disclose in the above note the items and values for those categories used, and include appropriate disclosure in note 1(i) for example: ‘Investments held for trading purposes are classified as current assets and are stated at fair value, with any resultant gain or loss recognised in the operating statement.’ Other Financial Assets can only be classified as “Investments Held to Maturity” if the entity has approval from the Minister for Finance. Impairment of financial assets In accordance with accounting standards and as agreed with VAGO, financial assets should be assessed for impairment on the basis of the instrument having either lost 20 per cent or more of its cost at balance date or where its market value has been less than its cost for a period of 12 or more months. For impaired financial assets, an entity shall disclose: (a) Interest income on impaired financial assets accrued in accordance with paragraph AG93 of AASB 139; and (b) The amount of any impairment loss for each class of financial assets. Derecognition of financial assets: An entity may have transferred financial assets in such a way that part or all of the financial assets do not qualify for derecognition (see paragraphs 15-37 of AASB 139). The entity shall disclose for each class of such financial assets: (a) the nature of the assets; (b) the nature of the risks and rewards of ownership to which the entity remains exposed; (c) when the entity continues to recognise all of the asset, the carrying amounts of the asset and of the associated liability; and (d) when the entity continues to recognise the asset to the extent of its continuing involvement, the total amount of the asset, the amount of the asset that the entity continues to recognise and the carrying amount of the associated liability. Instead of disclosing this information in a separate note, it may be more appropriate to include such disclosures in the relevant asset notes. N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity 79 should ensure that their accounting policies are presented in their financial statements.
  • 83. ABC Health Service Notes to the Financial Statements 30 June 2009 Commentary - Inventories Inventories are to be valued at the lower of cost and net realisable value. Inventories held for distribution are to be valued at the lower of cost and current replacement cost. Under FRD 102 Inventories: • Land held for sale inventories must be measured on a ‘specific identification of cost’ basis. • High value, low volume inventory items must be measured on a ‘specific identification of cost’ basis. • All other inventories must be measured using the ‘weighted average cost (WAC) formula. An exception is allowed for the inventories of entities that prior to the date of transition to A-IFRS were using inventory systems configured to measure such inventories using the FIFO method. If material, inventory measured on this basis must be separately disclosed in the entities financial report. It is expected that entities that have applied this concession to use the FIFO method will change to the WAC method when they upgrade/replace their inventory systems. Paragraph 36.1 of AASB 102 Inventories, requires not-for-profit entities to disclose the following: (a) the accounting policies adopted in measuring inventories held for distribution, including the cost formula used; (b) the total carrying amount of inventories held for distribution and the carrying amount in classifications appropriate to the entity; (c) the amount of inventories held for distribution recognised as an expense during the period in accordance with paragraph Aus34.1; (d) the amount of any write-down of inventories held for distribution recognised as an expense in the period in accordance with paragraph Aus34.1; (e) the amount of any reversal of any write-down that is recognised as a reduction in the amount of inventories held for distribution recognised as expense in the period in accordance with paragraph Aus34.1; (f) the circumstances or events that led to the reversal of a write-down of inventories held for distribution in accordance with paragraph Aus34.1; (g) the carrying amount of inventories held for distribution pledged as security for liabilities; and (h) the basis on which any loss of service potential of inventories held for distribution is assessed, or the bases when more than one basis is used. 80 N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity should ensure that their accounting policies are presented in their financial statements.
  • 84. ABC Health Service Notes to the Financial Statements 30 June 2009 Commentary – Non-current Assets Classified as Held For Sale Entities should classify a non-current asset (or disposal group) as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. For this to be the case, the asset (or disposal group) must be available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets (or disposal groups) and its sale must be highly probable. Refer to paragraph 8 of AASB 5 Non-current Assets Held For Sale and Discontinued Operations for a definition of a highly probable sale. Commentary – Other Assets To the extent that any items are financial instruments, an entity shall provide disclosures as required by AASB 7. Further guidance on disclosure requirements of AASB 7 are provided in the commentary box of relevant notes. N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity 81 should ensure that their accounting policies are presented in their financial statements.
  • 85. ABC Health Service Notes to the Financial Statements 30 June 2009 82 N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity should ensure that their accounting policies are presented in their financial statements.
  • 86. ABC Health Service Notes to the Financial Statements 30 June 2009 N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity 83 should ensure that their accounting policies are presented in their financial statements.
  • 87. ABC Health Service Notes to the Financial Statements 30 June 2009 Commentary – Investments Accounted for Using the Equity Method Accounting Standards AASB 128 Investments in Associates and AASB 131 Interests in Joint Ventures do not explicitly state whether the disclosure of summarised financial information is to be made individually or in aggregate. The entity should consider disclosing information on an individual basis where this is material to the evaluation of operating performance and financial position of the investor. Refer to AASB 128 and AASB 131 for further details. 84 N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity should ensure that their accounting policies are presented in their financial statements.
  • 88. ABC Health Service Notes to the Financial Statements 30 June 2009 N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity should ensure that their accounting policies are presented 85 in their financial statements.
  • 89. ABC Health Service Notes to the Financial Statements 30 June 2009 Commentary – Property, Plant and Equipment Land, Buildings and Cultural Assets: Subsequent to initial recognition as assets, land, buildings and cultural assets are measured at fair value. Crown Land: Generally accepted accounting principles suggest that Crown land should be valued and included in the Balance Sheet of the entity occupying the land. Where control of land is formally vested in entity, the value of the land should be recorded as a non-current asset. However, where an entity pays an economic rental for use of the land, the land value should not be reported as a non-current asset in the entities Balance Sheet. Where a peppercorn rental applies or the land is not formally vested but controlled by the entity, the land should be recognised as an asset. The date of last valuation, name and qualifications of valuer should be included. Plant and Equipment, Medical Equipment, Computers and Communications, Furniture and Fittings and Motor Vehicles: These are initially recognised at cost and subsequently measured at fair value less accumulated depreciation and impairment. Valuation of Library Books & Technical Data (Material): Library books should be valued at cost and a depreciation charge calculated on a straight-line basis. Impairment: Property, plant and equipment measured on the fair value basis should also be tested for impairment. Refer to AASB 136 Impairment of Assets for further details. Expenditures recognised in assets under construction AASB 116 requires disclosure of the amount of expenditure recognised in the carrying amount of an item of property, plant and equipment in the course of its construction. Where assets under construction are not identified as an asset class, separate disclosure is required. Treatment of Accumulated Depreciation AASB 116 Property, Plant and Equipment permits an entity to account for the accumulated depreciation at the date of the revaluation either by: • increasing proportionately the accumulated depreciation balance with the increase in the gross carrying amount of the asset so that the net carrying amount of the asset after revaluation equals its revalued amount (gross approach); or· • eliminating the accumulated depreciation balance against the gross carrying amount of the asset and increasing the net carrying amount to the revalued amount of the asset (net approach). To ensure consistency on a whole-of-state reporting basis, FRD 103D Non-current Physical Assets requires, entities to account for the accumulated depreciation at the date of the revaluation by applying the net approach. Restrictive Nature of Assets There may be restrictions on the use and/or disposal of cultural and heritage assets, Crown land and infrastructure. Disclosure should be made to identify those assets that are subject to restrictions and the nature of those encumbrances/restrictions. 86 N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity should ensure that their accounting policies are presented in their financial statements.
  • 90. ABC Health Service Notes to the Financial Statements 30 June 2009 N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity 87 should ensure that their accounting policies are presented in their financial statements.
  • 91. ABC Health Service Notes to the Financial Statements 30 June 2009 Commentary – Intangible Assets FRD 109 Intangibles requires all intangible assets to be recognised on a cost basis. Refer to FRD 109 for further details on recognition of intangible assets. Research Activities AASB 138 Intangible Assets prohibits the recognition of research activities as an asset and requires them to be expensed as incurred. Impairment of Intangible Assets Entities should disclose information on impaired intangible assets in accordance with AASB 136 Impairment of Assets in addition to the information required by AASB 138 Intangible Assets. Capitalisation Threshold FRD 109 requires expenditure on intangibles to be capitalised only if the amount involved meets the capitalisation threshold that is material to the entity (refer AASB 1031 Materiality for guidance on materiality). In addition, an entity should consider the following in determining the capitalisation threshold: • the impact of the capitalisation threshold on the Operating Statement and Balance Sheet, taking into consideration the pattern of investment and that an intangible asset may have a relatively short useful life (e.g. useful life of software is usually only 3-5 years); and • the administrative burden of conducting annual impairment tests of intangible assets. Additional disclosures for intangible assets acquired by way of government grant and initially recognised at fair value For intangible assets acquired by way of a government grant and initially recognised at fair value, a entity shall disclose: (a) the fair value initially recognised for these assets; (b) their carrying amount; and (c) whether they are measured after recognition under the cost model or the revaluation model. Intangible assets measured after revaluation using the revaluation model If intangible assets are accounted for at revalued amounts, an entity shall disclose the following: (a) by class of intangible assets: i. the effective date of the revaluation; ii. the carrying amount of revalued intangible assets; and iii. the carrying amount that would have been recognised had the revalued class of intangible assets been measured after recognition using the cost model; (b) the amount of the revaluation reserve that relates to intangible assets at the beginning and end of the period, indicating the changes during the period and any restrictions on the distribution of the balance to shareholders; and (c) the methods and significant assumptions applied in estimating the assets’ fair values. Notwithstanding (a)(iii) (above), in respect of not-for-profit entities, for each revalued class of intangible assets, the requirements to disclose the carrying amount that would have been recognised had the assets been carried under the cost model does not apply. 88 N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity should ensure that their accounting policies are presented in their financial statements.
  • 92. ABC Health Service Notes to the Financial Statements 30 June 2009 Commentary – Investment Properties Entities should disclose the methods and significant assumptions applied in determining the fair value of investment property, including a statement whether the determination of fair value was supported by market evidence or was more heavily based on other factors (disclose these factors) because of the nature of the property and lack of comparable market data. Entities are required to disclose the extent to which the fair value of investment property is based on a valuation by an independent valuer who holds a recognised and relevant professional qualification and has recent experience in the location and category of the investment property being valued. If there has been no such valuation, that fact shall be disclosed Properties held by not-for-profit entities to meet service delivery objectives are not investment properties and must be classified as property, plant and equipment. The reason for classifying a property that would otherwise satisfy the definition of investment property as property, plant and equipment must be documented and approved by the entities Responsible Body (FRD 107 Investment Properties). After recognition, investment properties must be measured using the fair value model unless prior written approval from the Minister for Finance has been obtained to use the cost model. N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity 89 should ensure that their accounting policies are presented in their financial statements.
  • 93. ABC Health Service Notes to the Financial Statements 30 June 2009 Commentary – Payables Payables are to include payables for supplies and services, capital expenditure and interest accrued. The disclosure of payables should include the following: • Classification of the outstanding debts into ageing periods. • Public borrowing or financial accommodation transactions must be clearly indicated. • Secured liabilities and the nature of the security. Financial Instrument Disclosures Significance of financial instruments AASB 7 requires an entity to disclose information that enables users of financial report to evaluate the significance of financial instruments for its financial position and performance. Nature and extent of risks arising from financial instruments An entity shall also disclose information that enables users of its financial report to evaluate the nature and extent of risks arising from financial instruments to which the entity is exposed at the reporting date. Financial Guarantee An entity shall disclose the fair value of any financial guarantee that it provides to third parties, should the fair value of the liability become greater than zero either as part of this note for payables or in the note for other payables. Statutory Payables: Liabilities that are not contractual (such as liabilities that arise as a result of statutory requirements), are not financial liabilities. Therefore, these liabilities though may seem to be financial instruments, in fact are not within the scope of AASB 7. However, entities who wish to apply requirements from AASB 7 to such liabilities can do so at their own discretion. 90 N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity should ensure that their accounting policies are presented in their financial statements.
  • 94. ABC Health Service Notes to the Financial Statements 30 June 2009 N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity 91 should ensure that their accounting policies are presented in their financial statements.
  • 95. ABC Health Service Notes to the Financial Statements 30 June 2009 Commentary – Interest Bearing Liabilities Interest bearing liabilities include short and long term Government Bonds, Medium Term Notes and Finance Leases. The State’s interest bearing liabilities are to represent funds raised from the following sources: • Loans raised by the Commonwealth on behalf of the State. • Public domestic and overseas borrowing via the Treasury Corporation of Victoria; and • Private and public domestic borrowing. (Note: all borrowings require prior approval from the Treasurer) Refer to AASB 139 Financial Instruments: Recognition and Measurement for the recognition and measurement criteria for financial instruments. Overseas borrowings are to be translated at exchange rates prevailing at balance date unless they are subject to forward exchange contracts where the contract rate is used or where hedging strategies are in place. Exchange gains or losses are to be included in the Operating Statement in the period in which they arise. Finance leases: the obligations under such leases are to be capitalised at the fair value of the leased asset, or if lower, the present value of the minimum lease payments, each determined at the inception of the lease. The capitalised values are to be amortised over the period in which the entities expect to receive benefits from their use. The disclosure of interest bearing liabilities should include the following: • Classification of the outstanding debts into ageing periods. • Public borrowing or financial accommodation transactions must be clearly indicated. • Secured liabilities and the nature of the security. Commentary – Employee Benefits and Related On-Costs Provisions A provision is a present legal, equitable or constructive obligation to make a sacrifice of future economic benefits to other entities as a result of past transactions and the amount or timing of the sacrifice of future benefits is uncertain. A brief description of the nature of the present obligation and any significant uncertainties about each class of provision must be disclosed (including relevant major assumptions about 92 N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity should ensure that their accounting policies are presented in their financial statements.
  • 96. ABC Health Service Notes to the Financial Statements 30 June 2009 future events). Amounts of any expected recovery related to each class of provision must also be disclosed. AASB 137 Provisions, Contingent Liabilities and Contingent Assets defines provisions as ‘liabilities of uncertain timing or amount’. AASB 137 indicates provisions can be distinguished from other liabilities such as trade payables and accruals because there is uncertainty about the timing or amount of the future expenditure required in settlement. Although it is sometimes necessary to estimate the amount or timing of accruals, the uncertainty is generally much less than for provisions. Provisions exist when: • the entity has a present legal or constructive obligation to make a sacrifice of future economic benefits to other entities as a result of past transactions or past events; • the amount or timing of the sacrifice of future economic benefits is uncertain; • it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and • a reliable estimate can be made of the amount of the obligation. A present value approach is required for the measurement of provisions where the effect of the time value of money is material. A best estimate of the consideration required to settle the present obligation as at the reporting date may be required. For each class of provision, the following must be disclosed:  a brief description of the nature of the obligation and the expected timing of any resulting outflows of economic benefits;  an indication of the uncertainties about the amount or timing of those outflows. Where necessary to provide adequate information, an entity shall disclose the major assumptions made concerning future events, as addressed in paragraph 48 of AASB 137; and  the amount of any expected reimbursement, stating the amount of any asset that has been recognised for that expected reimbursement. Refer to AASB 137 for further guidance. N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity 93 should ensure that their accounting policies are presented in their financial statements.
  • 97. ABC Health Service Notes to the Financial Statements 30 June 2009 Commentary - Employee Benefits and Related On-Costs Provisions (cont.) AASB 119 Employee Benefits sets out the reporting requirements for employee benefits. Employee benefits include long service leave, accrued wages and salaries, annual leave, accrued days off, post employment benefits and termination benefits. On-costs such as WorkCover and superannuation provision should be included in the calculation of leave provisions. Provision is made in the accounts for obligations in respect of long service leave and annual leave entitlements not taken at balance date. The amounts are to be accrued annually at remuneration rates expected to apply when the obligation is settled, that is the expected future increase in remuneration rate and comply with the requirements of AASB 119. FRD 17A ‘Long Service Leave Wage Inflation and Discount Rates’ permits agencies to use other wage inflation rates in the calculation of LSL where agencies can clearly demonstrate that for industry-specific reasons, the use of the alternative rates will result in more relevant and reliable LSL calculations. It is currently envisaged that the Department will not provide the industry-specific rates to entities and payroll bureaus as it has done in previous years, and that the DTF defined rate will be applied. All staff, including S.97 staff, are deemed to be employees of the entity whether employed directly or indirectly. As such all employee benefits are to be accrued by the entity. Long Service Leave LSL representing ten plus years of continuous service is: a) disclosed as a current liability even where the agency does not expect to settle the liability within 12 months as it will not have the unconditional right to defer the settlement of the entitlement should an employee take leave within 12 months; b) measured at: i. nominal value under AASB 119 where a component of this current liability is expected to fall due within 12 months after the end of the period; and ii. present value under AASB 119 where the entity does not expect to settle a component of this current liability within 12 months. LSL representing less than ten years of continuous service is: a) disclosed in accordance with AASB 101 as a non-current liability; and b) measured at present value under AASB 119 as the entity does not expect to settle this non-current liability within 12 months. Accrued Wages and Salaries, Annual Leave and Accrued Days Off Provisions for employee entitlements are reported as a liability in the Balance Sheet with details disclosed in a note. The liability is calculated on what is owed at 30 June. Sick Leave A current liability should only be recognised if it is probable that sick leave expected to be taken in future reporting periods will be greater than entitlements which are expected to accrue in those periods. 94 N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity should ensure that their accounting policies are presented in their financial statements.
  • 98. ABC Health Service Notes to the Financial Statements 30 June 2009 N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity 95 should ensure that their accounting policies are presented in their financial statements.
  • 99. ABC Health Service Notes to the Financial Statements 30 June 2009 96 N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity should ensure that their accounting policies are presented in their financial statements.
  • 100. ABC Health Service Notes to the Financial Statements 30 June 2009 Commentary – Equity Contributed Capital Transfers between wholly-owned public sector entities and the Victorian State Government or another entity that is wholly-owned and controlled by the Government must be classified and recognised as contributed capital when they satisfy the definition of ’contribution by owners’. Contributed capital can also be recognised after two or more entities have amalgamated to form a new entity. FRD 119 ‘Contributions by Owners’ provides guidance and clarification on the application of paragraph 7(c) of Interpretation 1038 ‘Contributions by Owners to Wholly-Owned Public Sector Entities’. Restricted Purpose Funds Generally restricted specific purpose reserves are funds where agencies have possession or title to the funds but have no discretion to amend or vary the restriction and/or condition underlying the funds. The common examples are funds established with external control (separate board), restricted purpose donations, trust fund or bequest with conditions and auxiliary funds (separately incorporated and managed). The guidelines on the establishment and identification of restricted purpose funds are contained in the Guidelines for the Identification and Establishment of Specific Purpose Funds. These guidelines are located at DHS website: http://www.health.vic.gov.au/spfunds/spfund.pdf N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity 97 should ensure that their accounting policies are presented in their financial statements.
  • 101. ABC Health Service Notes to the Financial Statements 30 June 2009 98 N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity should ensure that their accounting policies are presented in their financial statements.
  • 102. ABC Health Service Notes to the Financial Statements 30 June 2009 N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity 99 should ensure that their accounting policies are presented in their financial statements.
  • 103. ABC Health Service Notes to the Financial Statements 30 June 2009 Commentary – Non-Cash Financing and Investing Activities Information must be disclosed about non-cash transactions and other events which affect assets and liabilities that have been recognised in the financial statements, where the transactions and other events: • involve external parties; and • relate to the financing or investing activities of the health service. Other examples of transactions or events that would require disclosure under paragraph 44 of AASB 107 Cash Flow Statements include the following: • assumptions of liabilities; • acquisitions of assets by entering into a finance lease; • acquisitions of assets by assumption of directly related liabilities, such as purchase of a building by incurring a mortgage to the seller, and • conversion of debt to equity 100 N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity should ensure that their accounting policies are presented in their financial statements.
  • 104. ABC Health Service Notes to the Financial Statements 30 June 2009 N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity 101 should ensure that their accounting policies are presented in their financial statements.
  • 105. ABC Health Service Notes to the Financial Statements 30 June 2009 Commentary - Financial Instruments Significant accounting policies In accordance with paragraph 109 of AASB 101 Presentation of Financial Statements, an entity discloses, in the summary of significant accounting policies, the measurement basis (or bases) used in preparing the financial report and the other accounting policies that are relevant to an understanding of the financial report. The newly applicable AASB 7, requires comprehensive disclosure requirements for financial instruments including, but not limited to, the following: (a) the measurement basis (bases) and the criteria used to determine classification for different types of financial instruments; (b) the movement in fair value for financial instruments classified as fair value through profit or loss; (c) an entity’s objectives, policies and processes for managing capital; and (d) the qualitative and quantitative disclosures for each type of risk (e.g.: credit risk, liquidity risk, and market risk) that the entity is exposed to. Nature and extent of risk disclosures AASB 7 requires that an entity provide qualitative and quantitative disclosures for each type of risk arising from financial instruments. An entity shall disclose information that enables users of its financial report to evaluate the nature and extent of risks arising from financial instruments to which the entity is exposed at the reporting date. Qualitative disclosure For each type of risk arising from financial instruments, an entity shall disclose: (a) the exposures to risk and how they arise; (b) its objectives, policies and processes for managing the risk and the methods used to measure the risk; and (c) any changes in (a) or (b) from the previous reporting period. Quantitative disclosure For each type of risk arising from financial instruments, an entity shall disclose: (a) summary quantitative data about its exposure to that risk at the reporting date. This disclosure shall be based on the information provided internally to key management personnel of the entity (as defined by AASB 124 Related Party Disclosures); and (b) specific disclosures as required for each type of risk (see credit, liquidity and market risks), to the extent not provided in (a), unless the risk is not material Disclosures in this model only cover credit, liquidity and market risk. Entities should consider whether there may be other type of risks that they may need to disclose, specific to their own circumstances. 102 N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity should ensure that their accounting policies are presented in their financial statements.
  • 106. ABC Health Service Notes to the Financial Statements 30 June 2009 Credit risk exposures In addition to the required quantitative disclosures above, an entity shall disclose: (a) the amount that best represents its maximum exposure to credit risk at the reporting date without taking account of any collateral held or other credit enhancements (e.g. netting agreements that do not qualify for offset in accordance with AASB 132), either in narrative or tabular format; (b) in respect of the amount disclosed in (a), a description of collateral held as security and other credit enhancements; (c) information about the credit quality of financial assets that are neither past due nor impaired; and (d) the carrying amount of financial assets that would otherwise be past due or impaired whose terms have been renegotiated. Financial assets that are either past due or impaired An entity shall disclose by class of financial asset: (a) an analysis of the age of the financial assets that are past due as at the reporting date but not impaired; (b) the amount of any impairment loss (c) an analysis of financial assets that are individually determined to be impaired as at the reporting date, including the factors the entity considered in determining that they are impaired; and (d) for the amounts disclosed in (a) and (b), a description of collateral held by the entity as security and other credit enhancements and, unless impracticable, an estimate of their fair value. Collateral and other credit enhancements obtained When an entity obtains financial or non-financial assets during the period by taking possession of collateral it holds as security or calling on other credit enhancements (e.g. guarantees), and such assets meet the recognition criteria in other Australian Accounting Standards, an entity shall disclose: (a) the nature and carrying amount of the assets obtained; and (b) when the assets are not readily convertible into cash, its policies for disposing of such assets or for using them in its operations. Consolidated Carrying Amount The consolidated carrying amount is required to be sub-classified according to the following three categories: - Not Past Due and Not Impaired - Past Due but Not Impaired - Impaired Financial Assets Liquidity risk exposures An entity shall disclose: (a) a maturity analysis for financial liabilities that shows the remaining contractual maturities; and (b) a description of how it manages the liquidity risk inherent in (a). The amounts disclosed in the maturity analysis are the contractual undiscounted cash flows. Market risk exposures Market risk comprises of foreign currency risk, interest rate risk, and other price risk. Unless an entity prepares a sensitivity analysis, such a value-at-risk (VaR), that reflects interdependencies between risk variables (e.g. interest rates and exchange rates) and uses it to N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity 103 should ensure that their accounting policies are presented in their financial statements.
  • 107. ABC Health Service Notes to the Financial Statements 30 June 2009 manage financial risks, an entity shall disclose: (a) a sensitivity analysis for each type of market risk to which the entity is exposed at the reporting date, showing how profit or loss and equity would have been affected by changes in the relevant risk variable that were reasonably possible at that date; (b) the methods and assumptions used in preparing the sensitivity analysis; and (c) changes from the previous period in the methods and assumptions used, and the reasons for such changes. Carrying amount and fair value disclosure If management considers that the carrying amount of financial assets and financial liabilities recorded in the financial report does not approximate fair vales for each class of financial asset or financial liability, an entity shall disclose the fair value of that class of assets and liabilities in a way that permits it to be compared with the corresponding carrying amount in the balance sheet. (AASB 139 provides guidance for determining fair value) If changes in fair value have been estimated using a valuation technique, entities are required to disclose the resulting total amount of changes in fair value that was recognised in net operating result during the period. Financial instruments at fair value through profit or loss If the entity has designated a loan or receivable as fair value through profit or loss, it shall disclose: (a) the maximum exposure to credit risk of the loan or receivable at the reporting date; (b) the amount by which any related credit derivatives or similar instruments mitigate that maximum exposure to credit risk; (c) the amount of change, during the period and cumulatively, in the fair value of the loan or receivable that is attributable to changes in the credit risk of the financial asset determined either: o the amount of change in its fair value that is not attributable to changes in market conditions that give rise to market risk; or o using an alternative method the entity believes more faithfully represents the amount of change in its fair value that is attributable to changes in the credit risk of the asset; o Changes in market conditions that give rise to market risk include changes in an observed (benchmark) interest rate, commodity price, foreign exchange rate or index of prices or rates; and (d) The amount of change in the fair value of any related credit derivatives or similar instruments that has occurred during the period and cumulatively since the loan or receivable was designated. 104 N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity should ensure that their accounting policies are presented in their financial statements.
  • 108. ABC Health Service Notes to the Financial Statements 30 June 2009 N.B. Items that are not applicable or have zero values (rows and columns) should be deleted. Each entity 105 should ensure that their accounting policies are presented in their financial statements.
  • 109. Commentary – Commitments for Expenditure All amounts shown in the commitments note are nominal amounts inclusive of GST. Commitments disclosed are to include those operating and capital commitments arising from non-cancellable contractual or statutory obligations and any finance lease liabilities. Finance Leases Finance leases transfer to the entities, as lessees, substantially all the risks and rewards incidental to the ownership of a leased asset. The obligations under such leases are to be capitalised at the fair value of the leased asset, or if lower, the present value of the minimum lease payments, each determined at the inception of the lease. The capitalised values are to be amortised over the period in which the entities expect to receive benefits from their use. Operating Leases Operating leases, where the lessors substantially retain the risks and rewards of ownership, are to be recognised as expenses on a straight-line basis over the lease term unless another systematic basis is more representative of the time pattern of the user’s benefit. The cost of leasehold improvements is to be capitalised and amortised over the remaining term of the lease or estimated useful life of the improvements, whichever is the shorter. For both Operating and Finance Leases a general description (at end of note) of the lessee's leasing arrangements including, but not limited to the following: • the basis on which contingent rental payments are determined; • the existence and terms of renewal or purchase options and escalation clauses; and • restrictions imposed by lease arrangements, such as those concerning dividends, additional debts and further leasing. If it is an Operating Lease, the following expenses need to be disclosed if applicable: • Rental expense recognised in the year • Represented by: − Minimum lease payments − Contingent rentals − Rental expenses/revenues arising from sub-leases If it is a Finance Lease, the following needs to be disclosed if applicable: • Contingent rentals recognised as expenses in the year • Future minimum lease payments expected to be received on non-cancellable sub leases. Other Commitments These can include: • Operating commitments, which are commitments under contracts for operating expenditure (excluding operating lease liabilities) outstanding at reporting date but not recognised as liabilities. • Outsourcing human resources at the reporting date but not recognised as liabilities. • Remuneration commitments, where there are long-term employment contracts with employees under which the entity is committed to pay salaries and other remuneration benefits and is obligated to pay out the residual of the contracted amount or some other amount, other than accrued employee entitlements, in the event the employment of an individual is terminated by either party.
  • 110. Commentary - Contingent Assets and Contingent Liabilities A contingency includes a possible asset/liability, the existence of which is likely to have a material effect on the Balance Sheet, and will only be confirmed by the occurrence or non- occurrence of one or more uncertain future events not wholly within the control of the entity. Material contingent liabilities and assets are NOT recognised in the Balance Sheet. They are recorded at the point at which the contingency is evident. Disclosures required in the financial report for each class of contingent asset/liability include: • A brief description of the nature of the class of contingent liabilities or class of contingent assets • An indication of the uncertainties relating to the amount or timing of any future sacrifice or inflow of economic benefits • An estimate of the potential financial effect, or statement that it is not practicable to make such an estimate • The existence and amount of any possible recovery The extent to which material contingent assets and contingent liabilities are secured must also be disclosed. Financial Guarantee Entities are encouraged to disclose the underlying nominal amounts of any loan, for which it provided financial guarantees, in this note under contingent liabilities.
  • 111. Commentary - Segment Reporting Entities that provide Commonwealth funded residential aged care services (RACS) are required to comply with AASB 114 Segment Reporting (Refer to s21.26F Para 3e Residential Care Subsidy Amendment Principles 2005 (No. 1)) as a condition of receiving the Commonwealth's Conditional Adjustment Payments. The level of reporting required is at the Approved Provider (entity) level, not at individual service level, and entities are required to report as if for-profit. AASB 114 requires a primary reporting format for segment information about the predominant source and nature of the entity’s risks and returns and a secondary reporting format for segment information about the non-predominant source and nature of the entity’s risks and returns. AASB 114 requires the disclosure of financial information about the business segments and geographical segments. It requires disclosure of information about the different types of products and services an entity provides and the different geographical areas in which it operates. For entities, the primary reporting segment information is business segments and the secondary reporting format is geographical segment. Entities are not required to provide a detailed disclosure for geographical segments, however, the Standard does require some disclosure to be made. The level of reporting required for geographical segments is illustrated in the note above. Business segments are distinguishable components of the entity, not necessarily separately incorporated. If separate incorporation exists, a subsidiary relationship must be assessed as per AASB 127. Entities are required to disclose the financial results of the segments in the notes to the financial statements. Entities should determine their own business segments based on the guidance of AASB 114 and in consultation with their Auditor. In order to satisfy the Commonwealth’s RACS funding requirements RACS must be reported as a segment. Some examples of other business segments could be linen services, mental health facilities, catering, car park, diagnostic imaging and other material distinguishable components applicable to the health services, which meet the requirements of paragraph 35 of AASB 114. The reporting requirements in AASB 114 form the minimum level of disclosure in respect of each segment. The materiality of a segment to the reporting entity can be measured in terms of revenue, surplus/deficit and assets employed. On that basis, only material segments warrant disclosure by the entity. However, if total external segment revenue attributable to reportable segments is less than 75% of the total consolidated or entity revenue, additional segments to RACS should be identified as reportable segments even if they do not meet the 10% thresholds in paragraph 35 of AASB 114, until at least 75% of the total consolidated or entity revenue is included in reportable segments. Entities should be cognisant of paragraphs 47 and 48 of AASB 114 in determining the way in which asset, liability, revenue, and expense items are allocated to segments. It is not expected that business segments results identified under AASB 114, would necessarily correlate to the results for output groups identified in note 2. Any inter-segment transactions should be eliminated in order to avoid double counting.
  • 112. Commentary – Investments Accounted for Using The Proportionate Consolidation method When accounting for jointly controlled operations or jointly controlled assets, a venturer is to recognise in its financial statements its share of the assets and liabilities and any income and expenses arising from the jointly controlled operation or jointly controlled asset in accordance with AASB 131 Interest in Joint Ventures.
  • 113. Commentary - Responsible Person Related Disclosures FRD 21A Responsible Person and Executive Officer Disclosures in the Financial Report requires as notes, details of transactions between the Responsible Persons of an entity, or a Responsible person related party, and the entity. Responsible Persons of entities are the responsible Minister, Accountable Officer and Board members including anyone acting during the year. Responsible Person The Act requires "... Responsible Person's remuneration, in bands of $10,000 listing the number of Responsible persons whose actual remuneration for the period falls within each band." The responsible Minister for all public health services is the Minister for Health who does not have a remuneration paid by the entity. However, if any other transactions between the entity and the Minister exist they must be reported. The Accountable Officer for a entity is the Chief Executive Officer (CEO). The remuneration of a CEO is reported Remuneration of Responsible Persons. CEO's must disclose total remuneration received including access to motor vehicles, superannuation and other entitlements by way of salary package. Any other transactions of a remuneration nature between the entity and the CEO must be reported. All transactions between Board members, their related parties and the entity must be reported. Employees of the entity and VMOs, for example doctors who are members of the governing Board must disclose, under other transactions, that these doctors are in receipt of remuneration for clinical services provided and not for their role on the Board. Executive Officer "An executive officer includes a person employed as an executive officer at an annual remuneration rate not less than an executive employed by a department." (FRD21A Responsible Person and Executive Officer Disclosures in the Financial Report). For disclosure purposes, entities are required to include as Executive Officers the following: (officers on remuneration packages in excess of $100,000). • Deputy CEO; and • Other administration officers including: – Director of Medical Services – Director of Nursing – Directors of Services within the entity including business units. Remuneration includes all benefits received or receivable. Accordingly, remuneration needs to be determined on an accrual basis. Base remuneration (amounts paid or payable during the reporting period excluding bonuses, redundancy payments, long service leave and retirement benefits) must be separately disclosed from total remuneration. Where the difference between base and total remuneration is material, the reason for the variance should be supported by explanatory commentary. Disclosure is required of the number of executive officers whose total remuneration for the year falls within each successive $10,000 band, commencing at $100,000. However, in accordance with FRD 21, the base remuneration of executive officers should be disclosed separately. This will require disclosure of the number of executives whose base remuneration is less than
  • 114. $100,000, but their total remuneration is greater than this amount. It does not require disclosure by name. Where a Responsible Person already has a remuneration disclosed it does not need to be duplicated under Executive Officers disclosures. Doctors should not be included unless they are involved in the executive and management functions of the entity. Where doctors are included the total remuneration must include payments from Special Trust funds under the control of the reporting entity. Commentary - Events Occurring after the Balance Sheet Date Non-adjusting events - Controlled date Commentary after reporting Entity A non-adjusting event is an event that is indicative of conditions that arose after the reporting date. For examples refers to a separately incorporated entity inEvents the decision-making A controlled entity of non-adjusting events refer to AASB 110 which after the Balance Sheet capacity is dominated directly or indirectly by the reporting entity in relation to financial and Date. operating policies of the entity so as to enable the entity to operate under those policies in Updatingthe objectivesabout conditions at the common form of control within the pubic pursuing disclosures of the reporting entity. A reporting date If an entity receives the capacity after the reporting date about conditions that existed at the hospital industry is information of the reporting entity to dominate the composition of the reporting directors or governing board of another entity these conditions, in light of the and board of date, it shall update disclosures that relate to (Refer AASB 127 Consolidated new Separate Financial Statements). information. For example, if evidence becomes available after the reporting date about a contingent liability that existed at the reporting date, in addition to considering whether to Disclosure of controlled entities recognise or change a provision under AASB 137 Provisions, Contingent Liabilities and Contingent AUS42.1 of entity 127 requires the identity and about the contingent liability in light Paragraph Assets, the AASB should update its disclosures certain details of controlled entities of the disclosed. The concept of materiality in AASB 1031 applies to these disclosure to be evidence. requirements, and in some circumstances disclosures may not be necessary because they are not material.
  • 115. Commentary - Discontinued Operations A restructuring, transaction or other event must be reported as a discontinued operation when, and only when, it meets the definition of a discontinued operation in accordance with AASB 5 Non-Current Assets held for Sale and Discontinued Operations. A discontinued operation is a component of an entity that (a) either has been disposed of or is classified as held-for-sale and represents a separate major line of business or geographical area of operations; (b) is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations; or (c) is a subsidiary acquired exclusively with a view to resale. A component of an entity comprises operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity. In other words, a component of an entity will have been a cash-generating unit or a group of cash-generating units while being held for use. Changing the scope of an operation or the manner in which it is conducted does not result in a discontinuing operation, because that operation although changing is continuing. An example is the outsourcing activities previously conducted internally. Refer to AASB 5 Non-Current Assets Held for Sale and Discontinued Operations for further detail.
  • 116. Correction of error and revision of estimates Prior Period Errors Under AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors, entities are required to correct material prior period errors retrospectively in the first financial report authorised for issue after their discovery by: • restating the comparative amounts for the prior period(s) presented in which the error occurred, or • if the error occurred before the earliest prior period presented, restating the opening balances of assets, liabilities and equity for the earliest prior period presented. A prior period error shall be corrected by retrospective restatement except to the extent that it is impracticable to determine either the period-specific effects or the cumulative effect of the error. Retrospective restatement is correcting the recognition, measurement and disclosure of amounts of elements of financial statements as if a prior period error had never occurred. When it is impracticable to determine the period-specific effects of an error on comparative information for one or more prior periods presented, the entity should restate the opening balances of assets, liabilities and equity for the earliest period for which retrospective restatement is practicable (which may be the current period). When it is impracticable to determine the cumulative effect, at the beginning of the current period, of an error on all prior periods, the entity should restate the comparative information to correct the error prospectively from the earliest date practicable. In applying paragraph above, an entity shall disclose the following: (a) the nature of the prior period error (b) for each prior period presented, to the extent practicable, the amount of the correction for each financial statement line item affected; (c) the amount of the correction at the beginning of the earliest period presented; and (d) if retrospective restatement is impracticable for a particular prior period, the circumstances that led to the existence of that condition and a description of how and from when the error has been corrected. Financial reports of subsequent periods need not repeat these disclosures.

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