STATEMENT X: NAME - Department of Finance · Web viewThe value of listed shares is determined by reference to the current quoted market price of the shares. The value of unlisted shares

Note 2: Reconciliation of cash

81

2001 2000$m $m

Note 2 (a): Reconciliation of operating result to net increase/ (decrease) in cash

Operating result after abnormal items 8,092 24,048less Revenues not providing cash Net foreign exchange gains - (1,414) Net gains from asset sales program (44) (14,936) Net gains from sale of assets (3,192) (1,366) Other (1,422) (214)

Total revenues not providing cash (4,658) (17,930)plus Expenses not requiring cash Increase in employee entitlements 2,118 2,983 Depreciation/amortisation expense 6,499 5,826 Provision for bad and doubtful debts 417 363 Provision for diminution in value of assets 2,190 777 Net foreign exchange losses 595 1,129 Other non-cash expenses 584 (209)

Total expenses not requiring cash 12,403 10,869plus Cash provided by working capital items Decrease in inventories - 7 Decrease in other non-financial assets - 35 Increase in suppliers 482 42 Increase in other provisions and payables 3,410 3,594

Total cash provided by working capital items 3,892 3,678less Cash used by working capital items Increase in inventories (360) - Increase in receivables (4,885) (1,577) Increase in other financial assets (204) (107) Increase in other non-financial assets (464) - Decrease in other provisions and payables (103) -

Total cash used by working capital items (6,016) (1,684)Net operating cashflows from financial institutions (1,224) (883)

equals Net cash from/(to) operating activities 12,489 18,098Net cash from/(to) investing activities (6,055) 94

equals Cash surplus/(deficit) 6,434 18,192Net cash from/(to) financing activities (2,565) (12,256)Net cash flows from financial institutions (3,728) (5,388)

equals Net (decrease)/increase in cash 141 548

Note 2: Reconciliation of cash (continued)

(a) During the 1999-2000 financial year, the second tranche of the Commonwealth's interest in Telstra was sold and the Commonwealth's interest in ADI Limited and Removals Australia was sold through the assets sales program. In addition, Telstra's and the Australian River Company's interest in certain controlled entities were sold.

82

2001 2000$m $m

Note 2 (b): Reconciliation of cash at the end of the reportingperiod as shown in the primary statement of cash flowsto the related items in the primary statement of financialposition

Items in the Statement of financial positionFinancial assets - cash 2,236 2,569Financial assets - Bills of exchange and promissory notes 1,161 684less Borrowings - overdrafts (10) (7)

Total items in the Statement of financial position 3,387 3,246Total as per the statement of cash flows 3,387 3,246

2001 2000$m $m

Note 2 (c): Cash flows associated with entities disposed of during the year

Proceeds from asset sales program During the year Telstra's interest in certain controlled entities were sold.Total proceeds on sale:

Cash 680 10,128Debtors - 6,287Share issue 1,692 391

Total proceeds 2,372 16,806(a)

(representing proceeds received or receivable from sale)Assets and liabilities held at disposal date in total for

entities sold were:AssetsTotal cash held at date of disposal 64 60Other financial assets 142 1,477Total non-financial assets 734 4,345Total assets 940 5,882LiablitiesTotal debt 16 1,708Total provisions and payables 403 2,102Total liabilities 419 3,810Net assets 521 2,072Associated costs and other items 147 n/aBook value of entities disposed and associated costs 668 2,072


83

2001 2000$m $m

Note 2 (d): Cash flows associated with entities acquired during the year

During the year, Telstra and the Australian Industry Development Corporation acquired interests in certain controlled entities.

Consideration for acquisition:Cash 3,140 -Other 426 -

Total consideration 3,566 -

Fair value of assets and liabilities of entities acquired were:AssetsTotal cash 41 -Other financial assets 150 -Total non-financial assets 1,312 -Total assets 1,503 -LiablitiesTotal debt 47 -Total provisions and payables 351 -Total liabilities 398 -Net assets 1,105 -Commonwealth share of net assets acquired 672 -Goodwill / (Discount) on acquisition 1,469 -Acquisition costs w ritten-off 1,425 -Fair value of Commonwealth's share of net assets acquired and goodwill 3,566 -


(b) Commonwealth entities classified as financial institutions are the Reserve Bank of Australia and the Export Finance Insurance Corporation.

84

2001 2000$m $m

Note 2 (e): Net cash flows from financial institutions(b)

Cash flows from operating activitiesSales of goods and services 88 140Interest 1,645 1,376Dividends 3 3Payments re employees and suppliers (160) (223)Interest on debt and other financing costs (365) (413)Other 13 -

Net cash from/ (to) operating activities 1,224 883Cash flows from investing activities

Proceeds from sales of property, plant and equipment 14 1Purchases of property, plant and equipment (8) (24)Net proceeds from the sale of investments (6,401) (2,038)Loans 145 (233)Other 142 (329)

Net cash from/ (to) investing activities (6,108) (2,624)Cash flows from financing activities

Proceeds from issues of currency 1,733 1,882Net increase/(decrease) in borrowings (235) 114Net increase/(decrease) in deposits (342) (5,643)

Net cash from/ (to) financing activities 1,156 (3,647)Net cash flows from financial institutions (3,728) (5,388)

Note 3: Analysis of sub-functions

85

2001 2000$m $m

Note 3 (a): Education expenses by sub-functionEducation sub-function

Higher education 4,129 3,887Schools 5,409 4,848Student assistance 690 644Vocational and other education 1,103 1,591General administration 42 40

Total education expenses by sub-function 11,373 11,010

Note 3 (b): Health expenses by sub-functionHealth sub-function

Medical services and benefits 12,336 11,451Hospital services 7,457 7,035Pharmaceutical services and benefits 5,050 4,173Nursing home subsidies and domicile care (a) 61 450General administration 1,001 1,302Aboriginal and Torres Strait Islander health 160 162Other health services 1,050 743

Total health expenses by sub-function 27,115 25,316(a) Expenses for assistance to the aged have been reclassified from Health to Social security and welfare.

Note 3 (c): Social security and welfare expenses by sub-functionSocial security and welfare sub-function

Assistance to families with children 18,047 15,047Assistance to the aged 25,056 19,636Assistance to unemployed and sick 5,714 5,806Assistance to people with disabilities 7,357 6,810Assistance to veterans and dependents 5,415 4,568Assistance to the young 2,110 1,946General administration 1,758 1,824Aboriginal advancement 2,574 1,170Other welfare programs 298 221

Total social security and welfare expenses by sub-function 68,329 57,028

Note 3 (d): Transport and communication expenses by sub-functionTransport and communication sub-function

Communication 20,767 18,399Rail transport 448 518Air transport 971 1,007Road transport 947 879Sea transport 169 273Other transport and communication expenses 144 133

Total transport and communication expenses by sub-function 23,446 21,209

Note 3: Analysis of sub-functions (continued)

Note 4: Income tax revenue

Note 5: Indirect tax revenue

86

2001 2000$m $m

Note 3 (e): General purpose inter-government transactions expenses by sub-function

General purpose inter-government transactions sub-functionAssistance to State and Territory governments 4,481 17,916Assistance to local governments 1,328 1,279

Total general purpose inter-government transactions expenses by sub-function 5,809 19,195

2001 2000$m $m

IndividualsGross PAYG and PAYE 73,602 76,679Gross prescribed payments system 559 3,159Gross other 2,437 3,340

Total income tax from individuals 76,598 83,178

Other sourcesCompanies 33,580 22,816Superannuation funds 4,652 3,245Withholding tax 1,452 1,427Petroleum resources rent tax 2,388 1,205Superannuation contributions surcharge 634 667

Total income tax from other sources 42,706 29,360Total income tax 119,304 112,538

2001 2000$m $m

Excise duty 19,000 14,070Customs duty 4,571 3,746Sales tax and other indirect taxes 1,977 15,189

Total indirect tax 25,548 33,005

Note 6: Other taxes

Note 7: Charges for goods and services

87

2001 2000$m $m

Wool tax 43 92Agricultural production taxes 408 458Levies (other than agricultural) 345 194Superannuation guarantee charge 121 97Broadcasting license fees 210 214Other taxes 927 727Total other taxes, fees and fines 2,054 1,782

2001 2000$m $m

Sales of goods 22,272 22,520Rendering of services 5,536 4,848Immigration fees 236 206Corporation law fees 387 360Passenger processing fee 263 246Operating lease rental 32 160Licence fees (excluding broadcasting) 36 8Other fees from regulatory services 122 143Total charges for goods and services 28,884 28,491

Cost of sales 3,965 n/a

Note 8: Interest and dividends

Note 9: Net foreign exchange gains/(losses)

88

2001 2000INTEREST $m $mInterest from other governments

State and Territory debt 74 148Housing agreements 188 191General purpose advances 315 286

Total interest from other governments 577 625Interest from other sources

Swap interest 3,128 2,484Foreign securities and loans 1,497 1,155Deposits 118 109Advances 192 126Bills receivable 86 93Bank deposits 77 56Other loans 274 255Other 9 37

Total interest from other sources 5,381 4,315Total interest 5,958 4,940DIVIDENDS

Associated entities - 5International financial institutions 8 24Other dividends 71 48

Total dividends 79 77Total interest and dividends 6,037 5,017

2001 2000$m $m

Foreign exchange gainsNon-speculative 1,329 1,427

Total foreign exchange gains 1,329 1,427

less Foreign exchange lossesNon-speculative 1,904 1,127

Total foreign exchange losses 1,904 1,127Net foreign exchange gains/ (losses) (575) 300

Note 10: Net gains/(losses) from sale of assets

89

2001 2000$m $m

FINANCIAL ASSETSProceeds from sale of investments 6,256 782less selling costs of investments - 1less value of investments sold 4,742 874

Net gain/ (loss) from sale of investments 1,514 (93)

NON-FINANCIAL ASSETSProceeds from sale of land and buildings 796 986less selling costs of sale of land and buildings 52 29less written down value of land and buildings sold 642 796

Net gain/ (loss) from sale of land and buildings 102 161

Proceeds from sale of infrastructure, plant and equipment 368 432less selling costs of infrastructure, plant and equipment - (1)less written down value of infrastructure, plant and equipment sold 448 523

Net gain/ (loss) from sale of infrastructure, plant and equipment (80) (90)

Proceeds from sale of intangibles 1,614 1,363less written down value of intangibles 11 4

Net gain/ (loss) from sale of intangibles 1,603 1,359

Net gains/ (losses) from sale of non-financial assets 1,625 1,430

Net gains/ (losses) from sale of assets 3,139 1,337

Note 11: Asset sales program

Note 12: Other sources of non-taxation revenues

90

2001 2000$m $m

Gains from asset sales programRevenue from asset sales 44 15less written down value of assets sold - (1)less selling costs of asset sales - (1)

Total gains from asset sales program 44 13

Summary of gains/ (losses) from asset sales programRemovals Australia - 8Other - 5Total summary of net gains/ (losses) from asset sales program - 13

GAINS FROM THE ASSET SALES PROGRAM CONSIDERED SIGNIFICANT AND UNUSUAL

The following gains are of such a size and nature that their separate disclosureis relevant in explaining the financial performance of the Commonwealth.Gains from asset sales program considered significant and unusual

Revenue from asset sales - 16,360add gains to the economic entity on disposal - 604less written down value of assets sold - (1,866)less selling costs of asset sales - (176)

Total significant and unusual gains - 14,922

Summary of significant and unusual gains from asset sales programTelstra - Second Tranche - 14,770ADI Limited - 152Total summary of significant and unusual gains - 14,922

2001 2000$m $m

Superannuation premiums 60 44Industry contributions 32 77IMF related revenue 82 79Seigniorage 70 115Indexation on HECS receivable other student loans 412 130Royalties 10 11Writedown of liabilities 749 85Other fines 32 4Other 2,488 2,467Total other sources of non-taxation revenues 3,935 3,012

Note 13: Employees

Note 14: Suppliers

Note 15: Depreciation and amortisation

91

2001 2000$m $m

Wages and salaries 14,531 14,421Superannuation 7,231 7,219Leave and other entitlements 1,287 1,109Separations and redundancies 218 323Workers compensation premiums and claims 557 331Other 176 424Employee expenses considered significant and unusualThe following employee expenses are of such a size and nature that their separate disclosure is relevant in explaining the financial performance of the Commonwealth.Telstra redundancy and restructuring provision 572Total employees 24,000 24,399

2001 2000$m $m

Supply of goods and services 18,364 18,057Operating lease rental expenses 1,942 1,815Licence fees 3 9Other 147 167Total suppliers 20,456 20,048

2001 2000$m $m

DepreciationOther infrastructure, plant and equipment 3,424 3,364Specialist military equipment 1,628 1,253Buildings 659 647

Total depreciation 5,711 5,264Amortisation

Assets held under finance leases 103 80Intangibles

Computer software 528 397Other 158 85

Total amortisation 789 562Total depreciation and amortisation 6,500 5,826

Note 16: Net write-down and impairment of assets

Note 17: Other goods and services expenses

92

2001 2000FINANCIAL $m $mReceivables - bad and doubtful debts

Goods and services 204 222Taxes due 1,055 746Other loans and advances 21 95Penalty remission 236 167HECS loans 279 175Other student loans 117 93Other 184 101

Total receivables - bad and doubtful debts 2,096 1,599Net write-down/(reversal) and impairment arising from the revaluation 1,104 69

of investments and other financial assetsTotal financial write-down and impairment 3,200 1,668

NON-FINANCIALInventories 66 69Buildings 4 33Specialist military equipment 1,020 45Other infrastructure, plant and equipment 39 95Other non-financial assets - 192Intangibles 8 18Land 15 7

Net write-down and impairment arising from the revaluation of non-financial assets 1,152 459

Total net write-down and impairment of assets 4,352 2,127

2001 2000$m $m

Claims 2,332 1,761Other 4,529 3,756Total other goods and services expenses 6,861 5,517

Note 18: Grants

93

2001 2000$m $m

Public sectorGrants to State and Territory governments 18,226 31,264Grants through State and Territory governments 4,729 4,198Grants to local governments 109 206Grants to the multi-jurisdictional sector 4,159 4,020Other 2,986 2,052

Total grants to public sector 30,209 41,740Private sector

Grants to non-profit organisations 1,578 1,678Grants to commercial organisations 417 222Other 528 309

Total grants to private sector 2,523 2,209Overseas

Grants to overseas commercial organisations - 10Grants to overseas non-profit organisations 586 255Other 1 4

Total grants to overseas 587 269

Grant expenses considered significant and unusualThe following grants are of such a size and nature that their separate disclosure is relevant in explaining the financial performance of the Commonwealth. Recognition of grant liability in relation to the Vocational Education and Training Funding Act 1992 - 423Recognition of liability for the Medical Research Endowment Reserve and other Health special accounts - 513Total grants considered significant and unusual - 936Total grants 33,319 45,154

Note 19: Borrowing costs

Note 20: Suppliers liabilities

94

2001 2000$m $m

Interest on debtGovernment securities 5,342 5,986Swaps 3,256 2,367Loans 610 1,069Taxation overpayments 172 239Exchange settlement funds 50 55Deposits 9 52Other 18 16Net repurchase premia 314 102

Total interest on debt 9,771 9,886Other financing costs

Finance charges for finance leases 62 24Amortisation of discount on borrowings (200) (209)Other 673 176

Total other financing costs 535 (9)Total borrowing costs 10,306 9,877

2001 2000$m $m

Trade creditors 2,939 2,196Operating lease rental payable 122 114Other creditors 421 896Total suppliers liabilities 3,482 3,206

Note 21: Grants payable

Note 22: Other payables

Note 23: Deposits

95

2001 2000$m $m

Public sectorGrants to State and Territory governments 2,747 2,332Grants through State and Territory governments 1,571 1,380Grants to local governments 1 1Grants to the multi-jurisdictional sector 2,685 2,653

Total grants to public sector 7,004 6,366Private sector

Grants to non-profit organisations 11 25Grants to commercial organisations 68 1

Total grants to private sector 79 26Overseas

Aid programGrants to overseas non-profit organisations 1,164 1,173

Total grants to overseas 1,164 1,173

Total grants payable 8,247 7,565

2001 2000$m $m

Interest payable 2,895 2,781GST payable 26 -Other payables 446 186

Total other payables 3,367 2,967

2001 2000$m $m

Exchange settlement funds 839 1,164Drawing accounts held with the Reserve Bank of Australia 834 930State governments 455 343Monies held in trust 295 242Foreign governments 506 418Other 140 437Total deposits 3,069 3,534

Note 24: Government securities

Note 25: Loans

96

2001 2000$m $m

Treasury bonds 41,215 47,758Treasury notes 4,931 4,471Treasury indexed bonds 6,202 5,902Foreign currency loans 380 532Unamortised net premiums on borrowings 1,096 1,109Other 631 652Total government securities 54,455 60,424

2001 2000$m $m

Bills of exchange and promissory notes 10,927 10,483Non-bank loans 8,657 6,225Bonds (non-Treasury) 2,985 3,726Bank loans 3,325 1,266Debentures and notes 637 663Student Supplement Loan Scheme 938 1,009Other loans 64 10Total loans 27,533 23,382Loan maturity scheduleNot later than one year 5,258 5,590Later than one year and not later than 2 years 1,159 1,358Later than 2 years and not later than 5 years 6,528 5,432Later than 5 years 14,588 11,002Total loans by maturity 27,533 23,382

Note 26: Leases

Note 27: Other interest bearing liabilities

97

2001 2000$m $m

Finance lease liabilities as at the reporting dateare reconciled to the lease liability as follows:Not later than one year 196 173Later than one year and not later than 5 years 174 214Later than 5 years 55 60Minimum lease payments 425 446less future finance charges 48 64Total finance lease liabilities 377 382Finance lease liabilities maturity scheduleCurrent 92 152Non-current 285 230Total finance lease liabilities by maturity 377 382

2001 2000$m $m

Swap principal payable 4,543 2,457Amounts outstanding under repurchase agreements 1,654 4,137Special reserve - International Monetary Fund special 1,154 1,050 drawing rightsInscribed stock - face value 175 162Finance lease incentives 18 12Other 14 178Total other interest bearing liabilities 7,558 7,996

Note 28: Employee provisions

(a) Superannuation liability predominantly represents the present value of the Commonwealth's contractual liability under its various superannuation schemes for past services as estimated by the actuaries to the respective schemes.These liabilities do not fall due until the rules of the schemes provide for benefits to be payable, which generally is when members retire. They are thus spread over many years, of the order of sixty, into the future. Accordingly, a maturity schedule has not been provided for this liability.When the Commonwealth discharges this liability, it will normally obtain reciprocal benefits in the form of savings in old age pension payments to past employees and the receipt of income tax on superannuation payments. In effect, these reciprocal benefits provide a partial offset to the liability, usually referred to as a clawback. The value of the clawback is the present value of additional costs that would fall elsewhere upon the Commonwealth (either through increased expenditure on old age pensions or through reduced tax receipts) if the unfunded liabilities were not discharged.Since the liability for future pensions is not recognised in the financial statements, it has not been considered appropriate to recognise any potential savings in this liability. Also, the estimated future taxation revenue arising at the time of payment of the superannuation benefits has not been recognised as an asset in these consolidated financial statements.

Note 29: Other provisions

98

2001 2000$m $m

Remuneration:Superannuation (a) 78,753 76,552Leave and other entitlements 5,141 5,152Accrued salaries and wages 370 389

Separations and redundancies 233 635Non-military workers compensation and outstanding insurance claims 1,635 1,609Military workers compensation 1,196 1,031J udges pension 267 251Other 184 43

Total employee liabilities 87,779 85,662Number of employees

Number of full time equivalent employees at year end 291,163

2001 2000$m $m

Prepayments received/unearned income 2,228 1,422Accrued expenses 2,157 1,513Restructuring 429 397Unclaimed monies and outstanding claims 397 368Provision for interest on overpayment of taxes 232 193Customs rebates 19 20Guarantees likely to be called 44 30Provision for superannuation guarantee amounts 98 98

Total other provisions 5,604 4,041

Note 30: Receivables

99

2001 2000Taxes due $m $m

Income tax:Individuals 4,620 4,335Companies 7,448 4,347Superannuation funds 759 278Petroleum resources rent tax 427 418Withholding tax 6 8

Excise duty 19 17Sales tax 265 202Fringe benefits tax 353 112Customs duty 265 40Other taxes 196 116

Total taxes due 14,358 9,873Advances and loans

Loans to State and Territory governments 5,176 5,713Other loans and advances 5,281 4,639Advances 115 124HECS 7,211 6,243Student Supplement Loan Scheme 2,095 1,838

Total advances and loans 19,878 18,557Other receivables

Goods and services receivable 4,171 3,740Bills of exchange and promissory notes 3,311 1,309Swap principal 322 363Recoveries of benefit payments 837 820Interest receivable 91 123Dividends receivable 16 -Sales of property, plant and equipment 146 224Asset sales program 2 6,290International Monetary Fund related monies 11 13Finance lease receivable 119 84GST input credits receivable 213 -Other 1,291 1,460

Total other receivables 10,530 14,426Total receivables 44,766 42,856less provision for doubtful debts:

Taxes receivable 2,145 1,540Advances and loans receivable 2,286 1,882Goods and services receivable 208 239Other receivables 1,068 862

less provision for credit amendment to taxes 2,639 3,3428,346 7,865

Net receivables 36,420 34,991

Note 30: Receivables (continued)

Note 31: Investments — accounted for using the equity method

Note 32: Investments — other

100

2001 2000$m $m

Receivables maturity scheduleNot later than one year 25,105 24,923Later than one year and not later than 2 years 471 728Later than 2 years and not later than 5 years 1,869 4,221Later than 5 years 8,975 5,120Total net receivables by maturity 36,420 34,991

2001 2000$m $m

Investments - accounted for using the equity methodInvestments in associates 91 214Investments in joint ventures 1,194 284

Total investments - accounted for using the equity method 1,285 498

2001 2000$m $m

SharesShares in international financial institutions 784 739Shares in companies 869 1,007

Total shares 1,653 1,746Gold holdings 1,381 1,233Deposits 7,812 9,318Government securities 37,746 31,248Debentures 172 110International money fund quota 8,137 7,363Other 2,129 1,948

Total investments - other 59,030 52,966Investment maturity schedule

Not later than one year 29,461 27,801Later than one year and not later than 2 years 1,337 1,663Later than 2 years and not later than 5 years 4,000 2,487Later than 5 years 24,232 21,015

Total investments by maturity 59,030 52,966

Note 33: Accrued revenue

101

2001 2000$m $m

Accrued revenueAccrued taxation revenue 220 271Accrued interest revenue 562 455Other accrued revenue 1,181 1,157

Total accrued revenue 1,963 1,883

Note 34: Land and buildings, infrastructure, plant and intangiblesNote (a): Total (This includes amounts detailed in parts b, c, d and e)

(a) This depreciation range excludes certain leasehold improvements which have depreciation rates of up to 50 per cent.

Land Buildings Total land Specialist Other Total Computer Other Total Totaland military infrastructure infrastructure software intangibles intangibles

buildings equipment plant and plant and equipment equipment

Item $m $m $m $m $m $m $m $m $m $mGross valueAs at 30 J une 2000 6,560 19,235 25,795 45,440 55,822 101,262 3,452 554 4,006 131,063Adjustment to opening balances (29) (34) (63) 1,090 642 1,732 (298) 240 (58) 1,611Additions:

Purchase of new or secondhand assets 98 887 985 2,785 4,388 7,173 1,016 2,731 3,747 11,905Acquisition by finance lease - 24 24 - 175 175 - - - 199

Revaluations: write-ups/(write-downs) 710 40 750 422 961 1,383 6 (6) - 2,133Reclassification 1 48 49 84 39 123 3 - 3 175Write-offs (15) (124) (139) (2,483) (144) (2,627) (22) (4) (26) (2,792)Other movements (153) (121) (274) 1,688 (299) 1,389 11 - 11 1,126Disposals (250) (473) (723) (2) (1,922) (1,924) (18) - (18) (2,665)As at 30 June 2001 6,922 19,482 26,404 49,024 59,662 108,686 4,150 3,515 7,665 142,755Accumulated Depreciation/ AmortisationAs at 30 J une 2000 - 4,728 4,728 16,230 19,963 36,193 1,052 161 1,213 42,134Adjustment to opening balances - (3) (3) - (126) (126) (114) 57 (57) (186)Disposals - (80) (80) - (1,469) (1,469) (15) - (15) (1,564)Depreciation/Amortisation - 744 744 1,628 3,440 5,068 525 147 672 6,484

charge for the yearRevaluations: write-back - (213) (213) 153 (68) 85 3 (6) (3) (131)Reclassification - 6 6 594 6 600 1 - 1 607Write-offs - (65) (65) (1,463) (113) (1,576) (16) (3) (19) (1,660)Other movements - (213) (213) 792 (80) 712 (7) 3 (4) 495As at 30 June 2001 - 4,904 4,904 17,934 21,553 39,487 1,429 359 1,788 46,179Net book value as at 30 June 2001 6,922 14,578 21,500 31,090 38,109 69,199 2,721 3,156 5,877 96,576Net book value as at 30 June 2000 6,560 14,507 21,067 29,210 35,859 65,069 2,400 393 2,793 88,929

102

Note 34: Land and buildings, infrastructure, plant and intangibles (continued)Note (b): Assets at cost

(a) Pursuant to Australian Accounting Standard 38, certain Commonwealth entities, including Telstra, Snowy Mountains Hydro Electric Authority, Sydney Airport Corporation and Employment National have elected to apply the cost basis of recording property, plant and equipment. The above assets at cost table includes assets that were previously recorded at valuation for these entities.



Item $m $m $m $m $m $m $m $m $m $mAs at 30 J une 2001Gross value 2,122 3,945 6,067 42,914 46,810 89,724 3,806 3,493 7,299 103,090Accumulated depreciation/amortisation - (780) (780) (14,621) (18,117) (32,738) (1,252) (353) (1,605) (35,123)

Net book value 2,122 3,165 5,287 28,293 28,693 56,986 2,554 3,140 5,694 67,967

As at 30 J une 2000Gross value 246 2,207 2,453 14,566 38,264 52,830 2,925 525 3,450 58,733Accumulated depreciation/amortisation - (582) (582) (1,211) (15,274) (16,485) (805) (147) (952) (18,019)

Net book value 246 1,625 1,871 13,355 22,990 36,345 2,120 378 2,498 40,714103

Note 34: Land and buildings, infrastructure, plant and intangibles (continued)Note (c): Assets at valuation

(a) Further details of assets at valuation can be found in Note 1.

The reporting periods in which these assets were revalued are as follows:



Item $m $m $m $m $m $m $m $m $m $mAs at 30 J une 2001Gross value 4,800 15,537 20,337 6,110 12,852 18,962 344 22 366 39,665Accumulated depreciation/amortisation - (4,124) (4,124) (3,313) (3,436) (6,749) (177) (6) (183) (11,056)

Net book value 4,800 11,413 16,213 2,797 9,416 12,213 167 16 183 28,609

As at 30 J une 2000Gross value 6,314 17,028 23,342 30,874 17,558 48,432 527 29 556 72,330Accumulated depreciation/amortisation - (4,146) (4,146) (15,019) (4,689) (19,708) (247) (14) (261) (24,115)

Net book value 6,314 12,882 19,196 15,855 12,869 28,724 280 15 295 48,215104

Note 34: Land and buildings, infrastructure, plant and intangibles (continued)Note (d): Assets held under finance lease



Item $m $m $m $m $m $m $m $m $m $mAssets at valuation - pre 1996-97 - - - - - - 1 - 1 1Assets at valuation - 1996-97 - - - - - - - - - -Assets at valuation - 1997-98 - - - - 66 66 3 - 3 69Assets at valuation - 1998-99 2,094 2,732 4,826 2,797 1,374 4,171 93 2 95 9,092Assets at valuation - 1999-2000 372 3,106 3,478 - 527 527 10 - 10 4,015Assets at valuation - 2000-01 2,334 5,575 7,909 - 7,449 7,449 60 14 74 15,432

Net book value 4,800 11,413 16,213 2,797 9,416 12,213 167 16 183 28,609



Item $m $m $m $m $m $m $m $m $m $mAs at 30 J une 2001Gross value 7 124 131 228 270 498 - - - 629Accumulated depreciation/amortisation - (13) (13) (37) (73) (110) - - - (123)

Net book value 7 111 118 191 197 388 - - - 506

As at 30 J une 2000Gross value 7 109 116 - 414 414 - - - 530Accumulated depreciation/amortisation - (16) (16) - (77) (77) - - - (93)

Net book value 7 93 100 - 337 337 - - - 437

105

Note 34: Land and buildings, infrastructure, plant and intangibles (continued)Note (e): Assets under construction



Item $m $m $m $m $m $m $m $m $m $mAs at 30 J une 2001Gross value 3 580 583 9,434 219 9,653 210 8 218 10,454Accumulated depreciation/amortisation - - - - - - - - - -

Net book value 3 580 583 9,434 219 9,653 210 8 218 10,454

As at 30 J une 2000Gross value n/a n/a n/a n/a n/a n/a n/a n/a n/a n/ aAccumulated depreciation/amortisation n/a n/a n/a n/a n/a n/a n/a n/a n/a n/ a

Net book value n/ a n/ a n/ a n/ a n/ a n/ a n/ a n/ a n/ a n/ a106

Note 35: Inventories

Note 36: Other non-financial assets

107

2001 2000$m $m

Inventories held for saleFinished goods 269 214Land held for sale or resale - 7Raw materials and stores 70 28Work in progress 16 18

Total inventories held for sale 355 267Inventories not held for sale

Consumable stores 3,575 3,225Total inventories not held for sale 3,575 3,225Total inventories 3,930 3,492

2001 2000$m $m

Prepayments 1,621 1,345Work in progress (excluding inventory) 189 116Work in progress asset sales program 18 6Deferred acquisition costs 3 7Other 736 112Total other non-financial assets 2,567 1,586

Note 37: Equity(a) Equity of the Commonwealth Government of Australia(a)

(a) Details contained in this table relate to the economic entity (ie, inclusive of both Commonwealth and outside equity interests).

ReservesItem Accumulated

resultsAsset

revaluation reserve

Foreign currency

translation reserve

Investments reserve

Statutory funds

Other reserves

Total reserves

Contributed equity

Total

$m $m $m $m $m $m $m $m $mOpening balance as at 1 J uly 2000 (81,494) 8,731 (41) 26,308 545 1,591 37,134 3,344 (41,016)Adjustment to opening balances - refer Table 1 2,848 (57) - (22) - (12) (91) - 2,757Net result for 2001 8,092 8,092Dividends provided for or paid (1,155) (1,155)

2,376 2,376 2,376

Net acquisition/(disposal) of investments - - - -Transfers to/(from)/between reserves (283) 16 - (112) - 379 283 -Changes in accounting policies - -Currency translation gain/(loss) 30 30 30Capital payments made/ (repayments received)

- 465 465

Other movements - - (12) - - 24 12 - 12As at 30 June 2001 (71,992) 11,066 (23) 26,174 545 1,982 39,744 3,809 (28,439)less: Outside Equity Interests - refer to 37 (b) 4,041 36 3,809 7,886Total equity attributable to the Commonwealth (76,033) 39,708 - (36,325)

Table 1 - Details of adjustments to opening balances opening balances (as per AAS 31, para 21.3) are as follows:Recognition of assets for the first time and correction to previously recognised assets 2,645 - - - - - - 2,645Correction to other previously recognised liabilities 228 - - - - - - 228Other (25) (57) - (22) - (12) (91) - (116)Total 2,848 (57) - (22) - (12) (91) - 2,757

Net revaluation inc/(dec) - excluding investment reserves - refer Table 2

108

Note 37: Equity (continued)Table 2 — Net revaluation increases/(decreases)

(b) Outside Equity Interests

Note: Shaded areas in Note 37(a) Accumulated Results and Reserves of the Commonwealth Government of Australia are not applicable.

109

2001 2000$m $m

Net Inc/(Dec) Net Inc/(Dec)Financial assets 155 251Non-financial assets Land 624 234 Buildings 316 431 Specialist military equipment 268 1,818 Other infrastructure, plant and equipment 1,008 197 Other non-financial assets 4 (1) Intangibles 1 5Total 2,376 2,935

2001 2000$m $m

Outside equity interests in controlled entities comprise:Interest in opening accumulated results as at 1 J uly 2000 3,187 2,464Interest in adjustments to opening accumulated results - (128)Interest in operating result and abnormal items after income tax 2,028 2,475Interest in amounts transferred (to)/from reserves (22) (18)Interest in dividends provided for or paid (1,155) (1,628)Interest in other movements in accumulated results 3 21Interest in closing accumulated results 4,041 3,186Interest in opening reserves as at 1 J uly 2000 (6) 6Interest in adjustments to opening reserves - (19)Interest in net revaluation increases/(decreases) - (12)Interest in foreign currency translation gain/(loss) 14 2Interest in amounts transferred (to)/from accumulated results 22 18Interest in other movements in reserves 6 (1)Interest in closing reserves 36 (6)Interest in capital 3,809 3,344Total outside equity interests 7,886 6,524

Note 38: Financial Instruments

(a) Accounting policies

The terms and conditions and accounting policies relating to the Commonwealth’s financial assets and liabilities are detailed in Table A.

(b) Derivatives

Commonwealth entities utilise derivative financial instruments in the normal course of business in order to hedge exposure to fluctuations in interest and foreign exchange rates. Derivatives in use include interest rate swaps, interest rate futures, cross-currency swaps and forward foreign exchange contracts.

Details of significant derivatives are outlined below.

Interest Rate Swaps

A number of Commonwealth entities utilise interest rate swaps to hedge against interest rate risk. At balance date, the notional principal amounts and periods of expiry of interest rate swaps, are as follows:

110

Floating Fixed Interest Rate Maturity2001 Interest 1 year or 1 to 5 more than 5

Rate less years years$m $m $m $m

Financial LiabilitiesTelstra 404 (270) (173) 39EFIC 1,360 (12) (575) (773)Australia Post (280) - 60 220

Off Balance Sheet ItemsAOFM (30,575) 1,600 14,525 14,450National Railway Corporation 120 - (120) -ABC 10 - (10) -

Floating 2000 Interest 1 year or 1 to 5 more than 5

Rate less years years$m $m $m $m

Financial LiabilitiesTelstra 1,238 (261) 623 (1,600)EFIC 1,012 (88) (339) (585)Australia Post (280) - 60 220

Off Balance Sheet ItemsAOFM (24,225) 1,500 10,375 12,350National Railway Corporation 120 - (120) -ABC (15) (25) 40 -

Fixed Interest Rate Maturity

Note 38: Financial Instruments (continued)

Reserve Bank of Australia: Foreign Currency Swaps

The Reserve Bank of Australia uses foreign currency swaps to assist daily domestic liquidity management or to smooth the impact of other foreign currency transactions on Reserve Assets. As at 30 June 2001, the Bank was under contract to purchase $16.7 billion (2000: $10.1 billion) of foreign currency and sell $45.6 billion (2000: $27.5 billion) of foreign currency. As of that date, there was an unrealised net gain of $0.256 billion (2000: $0.279 billion) on these swap positions. These foreign currency swaps are off balance sheet items.

Cross-Currency Swaps

Commonwealth entities generally enter into cross-currency swaps to protect against exchange rate movements. The most significant of these contracts are entered into by:

The Australian Office of Financial Management undertakes cross-currency swap transactions on behalf of the Commonwealth to assist with the management of exchange rate risk associated with the Commonwealth debt portfolio. As at 30 June 2001, the principal amount of cross-currency swap receivables was $9.317 billion (2000: $8.983 billion) whilst the principal amount of cross-currency swap payables was $13.079 billion (2000: $11.115 billion). The swap principal and interest payable/receivable in relation to these cross currency swaps are disclosed in the financial statements on a net basis.

Certain other Commonwealth entities, primarily Telstra and the Export Finance Insurance Corporation, utilise cross-currency swaps to hedge borrowings denominated in foreign currencies. The remaining terms and notional principal amounts of these outstanding cross-currency swaps at balance date are:

111

Floating Fixed Interest Rate Maturity

2001Interest

Rate$m

1 year orless$m

1 to 5years

$m

more than 5 years

$m Telstra (6,624) 3,080 4,036 EFIC (2,523) 892 1,148 106

Floating Fixed Interest Rate Maturity

2000Interest

Rate$m

1 year orless$m

1 to 5years

$m

more than 5 years

$m Telstra (3,796) 2,109 1,838 EFIC (1,545) 444 885 160


Interest Rate Futures

As at 30 June 2001, the Reserve Bank of Australia used interest rate futures to hedge about 91 per cent of the Bank’s foreign currency reserves (excluding gold). The Export Finance Insurance Corporation also uses interest rate futures to reduce its exposure to interest rate risk on its loans and borrowings. The interest rate risks associated with these derivatives are provided in Table B.

Forward Foreign Exchange Contracts

Forward foreign exchange contracts entered into by Commonwealth entities are detailed in Part (c), Foreign exchange risk

Cashflow Matching Deed

The Australian Industry Development Corporation entered into a Cashflow Matching Deed with UBS Warburg in 1997. Under the Deed, UBS Warburg provides a cashflow-matching portfolio of assets and derivative financial instruments, which matched the cashflow requirements of the Corporation's liabilities. The derivative instruments used include interest rate swaps and exchange rate swaps. The notional principal amounts and period of expiry of the foreign currency components of the cashflow-matching swap contracts are as follows:

(c) Foreign exchange risk

Foreign exchange risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates.

A number of Commonwealth entities enter into forward foreign currency contracts to hedge the exchange rate risk on firm or anticipated purchase

112

2001 2000$m $m

J apanese YenTwo to five years 270 188Greater than five years 78 191

Swiss FrancsTwo to five years 164 151

2001 2000$m $m

Financial Assets 374 374

Financial Liabilities 314 314

commitments and borrowings denominated in foreign currencies or to hedge the exchange risk on investments denominated in foreign currencies.

113


The following table sets out the net value of outstanding contracts, including forward exchange contracts, the weighted average contracted exchange rates and the settlement period for these entities:

Where these contracts are utilised to hedge anticipated future transactions, any unrealised gains and losses on the contracts, together with the costs of the contracts, will be recognised in the financial statements at the time the underlying transaction occurs. The net unrecognised gains/(losses) on anticipated foreign currency transactions are:

114

Notional Principal Amount Weighted Average Rate2001

$m2000

$m2001 2000

US Dollars receivable:Less than one year 2,389 1,645 0.5136 0.6010One to five years 33 58 0.4994 0.6046

2,422 1,703US Dollars payable:Less than one year (166) (262) 0.5205 0.3063One to five years (6) (3) 0.6645 0.7100Greater than five years (11) (12) 0.7100 0.7100

(183) (277)J apanese Yen receivable:Less than one year 26 33 64.3951 63.3614

26 33J apanese Yen payable:Less than one year (59) (41) 64.3951 63.3614

(59) (41)Other currencies receivable:Less than one year 92 201 0.5452 3.1958One to five years - 1 - 0.59270.0000

92 202Other currencies payable:Less than one year (145) (120) 2.1044 0.2627One to five years (5) (10) 2.5402 2.2344

(150) (130)

Net Gains / (Losses)2001

$m2000

$mLess than one year 777 116


The Commonwealth, through the Australian Office of Financial Management, is open to foreign exchange risk as a result of contractual obligations in relation to cross-currency swap contracts and foreign currency loans. As a matter of portfolio benchmark policy, exposure to movements in the Australian dollar are not hedged. As at 30 June 2001, foreign currency liabilities of $4.175 billion (2000: $2.697 billion) and foreign currency assets of $0.034 billion (2000: $0.034 billion).

(c) Interest rate risk

The Commonwealth’s exposure to interest rate risk and the effective weighted average interest rate for each class of financial asset and liability is set out at Table B.

(d) Credit risk

Credit risk in relation to financial assets, is the risk that a third party will not meet its obligations in accordance with agreed terms. Generally, the Commonwealth’s maximum exposure to credit risk in relation to each class of recognised financial asset is the carrying amount of those assets as indicated in the Consolidated Statement of Financial Position. For off-balance sheet financial instruments, including derivatives, credit risk also arises from the potential failure of counterparties to meet their obligations under the respective contracts at maturity.

The majority of Commonwealth entities do not have significant exposures to any concentrations of credit risk. Generally, Commonwealth entities' exposures are to a large number of customers or highly rated counterparties and their credit risks are very low Commonwealth entities with geographically based concentrations of credit risk outside of Australia include:

The Export Finance and Insurance Corporation with exposure to credit risk arising from the financing and credit insurance facilities extended by the Corporation. These facilities are provided by EFIC on both a commercial basis and on the National Interest Account.

EFIC's principal exposure risk arises from Loans and Rescheduled Sovereign Debt totalling $4,089.2 million as at 30 June 2001 (2000: $3,671.3 million) and Export Credit Insurance, Guarantees, Residual value insurance, Bonds, Political Risk Insurance and Reinsurers with a combined risk of $2,126.6 million (2000: $2,083.7 million).

EFIC employs risk grading systems to rank its risks according to counter party and country risk exposures.

115


The Reserve Bank of Australia with foreign exchange holdings which are invested mainly in securities (issued by the governments of the United States, Japan and Germany) and bank deposits (with major OECD foreign commercial banks and central banks). The carrying amount of foreign exchange holdings as at 30 June 2001 is $35,786 million (2000: $30,228).

The RBA's exposures are all to highly rated counterparties and its credit risk is very low.

Telstra with concentrations of credit risk in the United States of $5,809 million (2000: $1,773 million), Europe $4,542 million (2000: $1,404 million) and other countries of $68 million (2000: $146 million).

From time to time the Commonwealth may have significant exposures to credit risk in relation to major asset sales.

(e) Net fair value

The net fair values of the majority of Commonwealth financial assets and liabilities equal or exceed their carrying amounts. The carrying value of assets and liabilities are determined using Generally Accepted Accounting Principles, while net fair value is often determined on market value or a discounted cash flow.

116


The carrying amounts and net fair values of financial assets and liabilities as at the reporting date are as follows:

117

2000-2001 1999-2000Total Aggregate Total Aggregate

Carrying Net Fair Carrying Net FairAmount Value Amount Value

Note $m $m $m $mFinancial assetsCash 2,236 2,236 2,568 2,568Receivables Advances and loans (incl HECS) 30 17,576 17,514 16,674 16,674 Other receivables 30 7,167 6,996 24,146 24,146Investments Gold 32 1,381 1,381 1,233 1,233 Deposits 32 7,817 7,823 9,318 9,318 Government securities 32 37,746 37,731 31,248 31,248 Debentures 32 172 172 110 110 Shares 32 1,700 1,700 1,783 1,783 International Monetary Fund quota 32 8,137 8,137 7,363 7,363 Other investments 32 175 179 101 101Accrued revenue 33 1,790 1,790 1,604 1,604Other financial assets 109 109 10 10Total financial assets 86,006 85,768 96,158 96,158

Financial liabilitiesSuppliers 20 2,732 2,732 3,059 3,059Personal benefits payable 414 414 2,237 2,237Subsidies payable 242 242 192 192Grants payable 21 8,243 8,243 7,591 7,591Other provisions and other payables 22, 29 4,906 4,906 5,225 5,225Overdrafts 10 10 7 7Deposits 23 3,079 3,079 3,534 3,534Government securities 24 53,569 61,181 59,315 63,734Loans 25 27,439 27,576 23,429 23,429Leases 26 382 382 381 381Other interest bearing liabilities 27 7,520 7,123 7,886 7,886Australian currency on issue 27,168 27,168 25,434 25,434Total financial liabilities 135,704 143,056 138,290 142,709

Table A: Accounting policiesFinancial instrument Accounting policies and methods Nature of underlying instrumentFINANCIAL ASSETS Financial assets are recognised when control over future

economic benefits is established and the amount of the benefit can be reliably measured.

Cash:Cash — Deposits at call Deposits are recognised at their nominal amounts.

Interest is credited to revenue as it accrues.Cash is a combination of Australian notes and coins on hand, net amounts owed to the Commonwealth for overnight clearance of financial transactions through clearing houses and deposits with financial institutions.

Receivables:Receivables for goods and services, fees, fines and recoveries.

Receivables are recognised at the nominal amounts due less any provision for bad and doubtful debts. Collectability of debts is reviewed at balance date. Provisions are made when collection of the debt is judged to be less rather than more likely.

All receivables are with entities external to the Commonwealth. Credit sales are normally on14 — 30 day terms.

Receivables for loans and advances

Loans are recognised at the amounts lent. Collectability of amounts outstanding is reviewed at balance date. Provision is made for bad and doubtful loans where collection of the loan or part thereof is judged to be less rather than more likely. In rare circumstances, loan repayment may be waived. Interest is credited to revenue as it accrues.

There are certain entities within the Commonwealth that have significant loan balances. The details of the significant terms and conditions relating to these loans are as follows:Australian Office of Financial Management/Department of Finance and Administration — The Commonwealth has various funding/advance arrangements in place with the States and Territories. The States and Territories are responsible for meeting interest and principal payments.Export Finance Insurance Corporation — Loans are made to external entities to extend the availability of export finance.Aboriginal and Torres Strait Islander Commission — Loans are made to external parties for periods up to 25 years and security is required.

118

Table A: Accounting policies (continued)Financial instrument Accounting policies and methods Nature of underlying instrumentReceivables for asset sales Receivables are carried at their nominal amounts due

less any provision for doubtful debts. A provision for doubtful debts is recognised when collection of the full nominal amount is no longer probable.

All receivables are with entities external to the Commonwealth. Receivables for asset sales are settled in accordance with the terms agreed in the sale contract.

Receivables for bills of exchange and promissory notes

Bills of exchange and promissory notes are valued at amortised cost with interest revenue recognised on an effective yield to maturity basis.

The bills of exchange and promissory notes have varying maturity terms and interest arrangements.

Higher Education Contribution Scheme (HECS)

Loans are recognised at the amounts lent. Collectability of amounts outstanding is reviewed at balance date. Provision is made for bad and doubtful loans where collection of the loan or part thereof is judged to be less, rather than more, likely. In rare circumstances, loan repayments may be waived. Indexation is credited to revenue on 1 June each year.

Loans are made under agreements with students. No security is required. All loans are indexed on 1 June each year using the movement in the CPI over the previous 12 months as the basis for indexation. Repayments are recovered through the Australian Taxation Office's taxation system.

Student Allowances These receivables are recognised at the time an overpayment is identified or the services are performed. Fines or charges may be imposed where this is allowed under specific legislation. Collectability of amounts outstanding is reviewed at balance date. Provision is made for bad and doubtful loans where collection of the loan is judged to be less, rather than more, likely.

All receivables are recorded at their nominal values. Levies, fines and charges may be levied at rates specified in specific legislation, particularly the Student and Youth Assistance Act.

Investments:Deposits Depending on the type of instrument, deposits are

recognised at either nominal or market value. Interest is credited to revenue as it accrues.

Deposits have varying terms and rates of interest.

Gold holdings Gold holdings (including gold on loan to other institutions) are valued at the Australian dollar equivalent of the 3pm fix in the London gold market on the last business day of June. The Reserve Bank of Australia loans gold to financial institutions participating in the gold market.

All gold loans are secured to 110 per cent of their market value by Australian dollar denominated collateral security. Interest on gold loans is accounted for on a standard accrual basis.

119

Table A: Accounting policies (continued)Financial instrument Accounting policies and methods Nature of underlying instrumentDomestic government securities

The Reserve Bank of Australia holds Australian dollar denominated securities issued by the central borrowing authorities of State and Territory Governments where these are acquired under repurchase agreements. Realised and unrealised gains or losses on domestic government securities are immediately taken to profit and loss.

Securities have varying interest rates and maturity dates depending on terms and conditions of the underlying security.

Foreign government securities

Foreign government securities comprise coupon and discount securities and repurchase agreements. Interest earned on discount securities is the difference between the actual purchase cost and the face value of the security. Interest earned on securities is accrued over the term of the security.

Coupon securities have bi-annual or annual interest payments depending on the currency and type of security. Securities have varying interest rates and maturity dates depending on terms and conditions of the underlying security.

Investments — Quota-International Monetary Fund

The investment is denominated in Special Drawing Rights and is valued at the Australian dollar equivalent. Dividend income is not earned from this investment.

The quota represents Australia's membership subscription to the International Monetary Fund (IMF). Each member is required to pay the IMF the amount of its initial quota and subsequent increases partly in the members own currency and the remainder in the form of reserve assets. A members quota is not increased until the member has consented to the increase.

Investments — International financial institutions

Investment is recognised at historical cost. Dividend income is not earned from these investments.

The investment represents Australia's membership in the Asian Development Bank, the International Bank for Reconstruction and Development, the International Finance Corporation and the European Bank for Reconstruction and Development.

Investments in other companies

Investments in other listed and unlisted companies are carried at the lower of cost and recoverable amount. The value of listed shares is determined by reference to the current quoted market price of the shares. The value of unlisted shares is determined by reference to underlying net assets. Dividends are brought to account as they are received.

The shareholdings represent shares in listed and unlisted companies.

120

Table A: Accounting policies (continued)Financial instrument Accounting policies and methods Nature of underlying instrumentAccrued revenue:Accrued revenue Accrued revenue is recognised when a service has been

provided but has not been invoiced. Accrued revenue is recognised at the nominal amounts due.

As for Receivables for Goods and Services once billed.

Financial liabilities Financial liabilities are recognised when a present obligation to another party is entered into and the amount of the liability can be reliably measured.

Overdrafts:Bank overdrafts Bank overdrafts are carried at the principal amount.

Interest is charged to expense as it accrues.Interest is charged at banks’ benchmark rates. No security is provided over bank overdraft facilities.

Government securities:Commonwealth Government securities

Debt is measured at face value and discount securities are measured at cash value. Premiums and discounts in relation to such borrowing are netted and amortised over the life of the borrowing on a straight line basis.

The Australian Office of Financial Management (AOFM) is responsible for advising the Treasurer on all aspects of debt management on behalf of the Commonwealth, including the issue of various borrowing instruments and the administration of the redemption of debt. The AOFM also administers the redemption of Commonwealth Government security debt on allocation to the States and Territories.

Loans:Loans Loans are recognised at their principal amounts. Non-

bank loans are carried at the balance yet to be repaid. Interest is expensed as it accrues.

Loans are carried at the amounts borrowed. Borrowings are on commercial terms. Effective interest rates vary according to individual loan terms and conditions. The loans are made under varying loan facility arrangements.

Student Supplement Loan Scheme

The amounts loaned by the Commonwealth have been disclosed as a liability and a receivable. The liability for the loans represents the amount of the principal outstanding.

The loans are provided by the Commonwealth Bank and are purchased by the Commonwealth after the loan guarantee has been in place for 5 years.

121

Table A: Accounting policies (continued)Financial instrument Accounting policies and methods Nature of underlying instrumentBills of exchange and promissory notes

Bills and Notes are either recognised when issued at the amount of the net proceeds received and carried at amortised cost until the liabilities are fully settled or at nominal face value. Interest on the instruments is recognised as an expense on a yield to maturity basis.

The bills of exchange and promissory notes issued have varying maturity terms and interest arrangements.

Bonds Bonds are carried at cost or adjusted cost (face value of debt adjusted for any unamortised premium or discount). Interest is calculated on a yield to maturity basis. Bonds repurchased are cancelled against the original liability and any gains or losses are taken to the profit and loss account as interest expense.

Bonds have varying interest rates and maturates.

Leases:Finance leases Liabilities are recognised at the present value of the

minimum lease payments at the beginning of the lease. The discount rates used are estimates of the interest rates implicit in the leases.

The period and effective interest rates vary according to the terms and conditions of the Finance Lease.

Deposits:Deposits The liabilities are recognised at their nominal amounts.

Interest is charged as an expense as it accrues.The Commonwealth takes deposits for varying periods and differing effective interest rates. The majority of these deposits are from banks, Government Instrumentalities, foreign governments and other foreign institutions.

Other debt:International Monetary Fund (IMF) Special Drawing Right (SDR) Allocation liability

This is valued at the Australian dollar equivalent of its liability in Special Drawing Rights. Interest expense is recognised as it accrues.

The SDR allocation liability reflects the current value in Australian dollars of the Department’s liability to repay to the IMF Australia’s cumulative allocations of SDRs. Interest is payable to the IMF in relation to the amount by which Australia’s SDR holdings are below Australia’s net cumulative allocations.

122

Table A: Accounting policies (continued)Financial instrument Accounting policies and methods Nature of underlying instrumentRepurchase agreements Securities sold but contracted for purchase under

repurchase agreements are reported within the relevant investment category and are valued at market prices. The counterpart obligation to repurchase is reported as an interest bearing liability. The difference between the sale and purchase price is recognised as interest expense over the term of the agreement.

In the course of it’s financial market operations the Reserve Bank of Australia engages in repurchase agreements involving foreign and Australian dollar marketable securities.

Inscribed stock Inscribed stock is recognised at face value net of any unamortised discount on issue. The discount on issue is amortised over the term of the issue. Interest is expensed as it accrues.

Inscribed stocks have varying terms to maturity and have their interest rate normally set quarterly.

Lease incentives The lease incentive is recognised as a liability on a receipt of the incentive. The amount of the liability is reduced on a straight line over the life of the lease by allocating lease payments between rental expense and reduction of the liability.

Commonwealth entities have received lease incentives on entering property operating leases.

Payables:Suppliers Creditors and accruals are recognised at their nominal

amounts, being the amounts at which the liabilities will be settled. Liabilities are recognised to the extent that the goods or services have been received (and irrespective of having been invoiced).

All creditors are entities external to the Commonwealth. Settlement is usually made net 30 days.

Personal benefits payable A financial liability for personal benefits is recognised when a present obligation to another party is entered into and the amount of the liability can be reliably measured

Period based benefits are paid in arrears following an entitlement period. Period based benefits owing at the end of the financial year are included as liabilities.Pay-day based benefits are not paid in relation to an entitlement period. Recipients qualify for payment on the date of payment. Accordingly, no liability is recognised in relation to these benefits.

123

Table A: Accounting policies (continued)Financial instrument Accounting policies and methods Nature of underlying instrumentGrants payable Multi-year non reciprocal grants are expensed when the

recipient government provides the agreed services. Other grants are recognised as liabilities and expensed in the year in which the grant agreements are made.

The Commonwealth makes multi-year funding agreements with State and Territory governments under various programs to meet its public policy objectives. Funds are provided annually and expensed in accordance with these agreements, except in cases where further funding is not provided until specific milestones have been met. As these grants are non-contractual in nature, no further disclosures required by AAS33 are made in this note.

Subsidies Subsidies are recognised as liabilities at balance date to the extent that the services have been received and the recipient is entitled to the subsidy.

These liabilities relate to contracts and/or agreements with parties external to the Commonwealth. Payments are made in accordance with the terms and conditions set out in the contract or agreement.

Outstanding claims Outstanding claims comprise the estimated costs of meeting all claims incurred whether reported or not.

Settlement due upon resolution of claim assessment.

Other payables Interest expense is recognised as it accrues. Interest is payable on Commonwealth Government Securities, swaps and other loans.

Provisions:Australian currency on issue

Australian currency issued represents a liability of the Reserve Bank of Australia (RBA) in favour of the holder. Currency issued for circulation including demonetised currency is measured at face value. When the RBA issues currency notes to the commercial banks, it receives in exchange funds equal to the full face value of the notes issued.

The RBA assesses regularly the value of the notes still outstanding at least five years after the note issue ceased which are judged to have been destroyed and therefore unavailable for presentation.There is no interest rate associated with currency on issue.

124

Table A: Accounting policies (continued)Financial instrument Accounting policies and methods Nature of underlying instrumentUnrecognised financial liabilities:Commitments Commitments are recognised where there are

obligations or undertakings to make future payments to other entities that exist at the end of the reporting period and have not been recognised as liabilities in the Statement of Financial Position.

Commitments recorded include the following classes of transactions:- committed future year grant payments;- non-cancellable operating lease obligations;- capital commitments for the acquisition or improvement of property, plant and equipment; and- commitments in respect of contractual obligations for goods and services that have not been provided at balance date.

Guarantees/Indemnities The amounts guaranteed or indemnified by the Commonwealth have been disclosed in the Schedule of Contingencies. At the time of completion of the financial statements, there was no reason to believe that the guarantees would be called upon, and recognition of the liabilities was therefore not required.

The guarantees or indemnities have been given in relation to various schemes/activities operated/supported by the Commonwealth and in relation to borrowing obligations.

Other contingencies Other contingencies relate to litigation action pending against the Commonwealth and other liabilities the future materialisation of which is uncertain, and are disclosed in the Schedule of Contingencies.

Legal action pending against and contested by the Commonwealth, and other contingent liabilities.

Derivatives Refer to 38(b) — Derivatives for a detailed coverage of accounting treatment and the underlying nature of the relevant financial instruments.

125

Table B: Interest rate risks — financial assets

Note00-01 99-00 00-01 99-00 00-01 99-00 00-01 99-00 00-01 99-00 00-01 99-00 00-01 99-00

$m $m $m $m $m $m $m $m $m $m $m $m % %Financial assets:Cash 1,137 1,383 787 43 - - - 30 312 1,112 2,236 2,568 6.21 5.19Receivables: Advances and loans 30 1,887 1,875 396 556 1,651 1,482 5,097 5,133 8,545 7,629 17,576 16,674 6.15 6.30 Other receivables 30 1,385 290 594 1,212 121 82 1,789 302 3,275 22,260 7,167 24,146 4.09 6.68Investments: Gold 32 - - 1,086 1,181 222 46 - - 73 6 1,381 1,233 1.60 1.50 Deposits 32 1,528 1,020 6,014 8,033 181 125 94 128 - 11 7,817 9,318 5.88 5.93 Government securities 32 - - 22,712 21,204 7,260 5,097 7,503 4,589 271 358 37,746 31,248 2.67 5.40 Debentures 32 - 1 32 21 52 32 89 57 - - 172 110 5.01 2.23 Shares 32 - - - - - - - - 1,700 1,783 1,700 1,783 n/a n/a International Monetary Fund quota 32 - - - - - - - - 8,137 7,363 8,137 7,363 n/a n/a Other investments 32 58 11 77 52 - - - - 40 38 175 101 5.11 6.89Accrued revenue 33 5 1 155 - - - - - 1,630 1,603 1,790 1,604 5.72 1.29Other financial assets - - - - - - - - 108 10 109 10 n/a n/aTotal financial assets 6,000 4,580 31,853 32,302 9,487 6,864 14,572 10,239 24,091 42,174 86,006 96,160

more than 5 Floating

Interest RateFixed Interest Rate Maturing in:

Interest RateNon-Interest

Bearing1 year or less 1 to 5 years

Weighted Average Effective

Total

126

Table B: Interest rate risks — financial liabilities

(a) The interest rate risk associated with interest rate and cross-currency swaps is disclosed in Note 36(b), Derivatives.(b) Notional principal amounts.

Note00-01 99-00 00-01 99-00 00-01 99-00 00-01 99-00 00-01 99-00 00-01 99-00 00-01 99-00

$m $m $m $m $m $m $m $m $m $m $m $m % %Financial liabilities:Suppliers 20 - - - - - - - - 2,732 3,059 2,732 3,059 6.32 n/aPersonal benefits payable - - - - - - - - 414 2,237 414 2,237 n/a n/aSubsidies payable - - - - - - - - 242 192 242 192 n/a n/aGrants payable 21 - - - - - - - - 8,243 7,591 8,243 7,591 n/a n/aOther provisions and 22, 29 24 100 2,719 2,778 - - 27 90 2,135 2,258 4,906 5,225 6.70 7.16other payablesOverdrafts 10 7 - - - - - - - - 10 7 14.00 16.10Deposits 23 1,879 3,301 1,199 - - - - - 2 233 3,079 3,534 4.80 5.90Government securities 24 211 2,224 7,873 8,581 18,353 16,865 27,127 31,638 6 8 53,569 59,315 7.58 7.99Loans 25 11,580 4,771 2,486 2,876 6,589 7,870 1,562 3,171 5,221 4,741 27,439 23,429 6.16 6.78Leases 26 259 281 18 40 67 54 36 - 1 6 382 381 7.15 5.88Other interest bearing liabilities 27 5,312 1,542 1,044 4,286 (483) 456 455 542 1,193 1,060 7,520 7,886 5.36 5.81Australian currency on issue - - - - - - - - 27,168 25,434 27,168 25,434 n/a n/aTotal financial liabilities 19,275 12,226 15,339 18,560 24,526 25,246 29,207 35,441 47,357 46,819 135,704 138,292Off-balance sheet

instruments(a)

Interest rate futures(b) 17 96 - 334 (17) (170) 287 (111) - - 287 149

Non-Interest Bearing Total

Floating Interest Rate 1 year or less 1 to 5 years more than 5

Fixed Interest Rate Maturing in:

Weighted AverageEffective

Interest Rate

127

Note 39: Events occurring after balance date

(a) The Commonwealth Government entered into an arrangement with HIH Claims Support Limited (HCSL) to provide assistance to policyholders suffering financial hardship as a result of the failure of the HIH Insurance Group. HCSL is a not-for-profit company and is the Trustee for the HIH Claims Support Group Trust. The agreement between HCSL and the Commonwealth was finalised on 6 July 2001, the same day as the Trust was formed.

On 27 August 2001, the NSW Supreme Court placed each of the 19 companies of the HIH group into formal liquidation and ordered the winding up. Tony McGrath and Alex Macintosh, partners from KPMG were formally appointed as Liquidators of each of the HIH companies.

(b) On the 24th August 2001, it was announced that the Commonwealth and the New South Wales Government had agreed to a comprehensive examination of the access and track management arrangements for interstate track in New South Wales, with a view to reaching an agreement to transfer management responsibility for this track to the Australian Rail Track Corporation.

(c) The Australian government has announced that it would seek to exchange land with the East Timorese government to construct consular facilities. As at the reporting date, the financial effect of the initiative is yet to be determined.

(d) On 1 July 2001, the Government announced a $1,000 tolerance for families who incur a Family Tax Benefit or Childcare Benefit overpayment due to misestimates of their income or shared care in 2000-01. The event occurred after balance date and has not been brought into account in the 2000-01 financial statements because it is not possible to reliably measure any impact in 2000-01.

(e) Following the terrorist attacks on the United States, global aviation insurers cancelled war-risk insurance. In response, the Commonwealth Government agreed to provide terrorist and war indemnity for Australian airlines, airports and other key service and facility providers in the aviation sector. Subsequently limited amounts of war risk insurance cover have been progressively reintroduced. The indemnity covers the gap between war risk insurance commercially available and the cover available prior to the 11 September 2001 events. The indemnities were provided initially for a period of one month and are being reviewed on a monthly basis.

128

Note 39: Events occurring after balance date (continued)

The Commonwealth Government also invoked Article IV of the ANZUS Treaty on the 14th September 2001. The extent of Australian involvement in any action taken by the United States as a result of the terrorist attacks is not clear at the date of this financial report and, as such, the financial effect of this event has not been recognised in this financial report.

(f) Following the collapse of the Ansett Group, the Commonwealth Government has established a Special Employee Entitlement Scheme to provide a safety net arrangement for Ansett Group employees if Ansett or it's parent company Air New Zealand cannot meet the cost of the entitlements. To fund the payment of these entitlements, the Government has also introduced two bills into Parliament to impose and collect a passenger ticket levy on all flights that originate in Australia. These events occurred after 30 June 2001 and the financial effect of the events have not been recognised in this financial report.

On 26 September 2001, the Commonwealth indemnified the Voluntary Administrators of the Ansett Group, Arthur Andersen, for the face value of tickets sold but not honoured in the event that Ansett Airlines ceases to operate. The Commonwealth’s maximum liability is capped at $25 million and the arrangement commenced on 29 September 2001 and extends to 31 January 2002.

129

Documents

STATEMENT X: NAME - Department of Finance · Web viewThe value of listed shares is determined by reference to the current quoted market price of the shares. The value of unlisted shares