a) General statementThe PTA is a not-for-profit reporting entity that prepares general purpose financial statements in accordance with Australian Accounting Standards, the Framework, Statements of Accounting Concepts and other authoritative pronouncements of the AASB as applied by the Treasurer's Instructions. Several of these are modified by the Treasurer's Instructions to vary application, disclosure, format and wording. Show
The Financial Management Act 2006 and the Treasurer's Instructions impose legislative provisions that govern the preparation of financial statements and take precedence over Australian Accounting Standards, the Framework, Statements of Accounting Concepts and other authoritative pronouncements of the AASB. Where modification is required and has had a material or significant financial effect upon the reported results, details of that modification and the resulting financial effect are disclosed in the notes to the financial statements. b) Basis of preparationThe financial statements have been prepared on the accrual basis of accounting using the historical cost convention, except for land, buildings, rollingstock, vessels, buses and infrastructure which have been measured at fair value. The accounting policies adopted in the preparation of the financial statements have been consistently applied throughout all periods presented unless otherwise stated. The financial statements are presented in Australian dollars and all values are rounded to the nearest thousand dollars ($'000). Note 3 'Judgements made by management in applying accounting policies' discloses judgements that have been made in the process of applying the PTA's accounting policies resulting in the most significant effect on amounts recognised in the financial statements. Note 4 'Key sources of estimation uncertainty' discloses key assumptions made concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. c) Reporting entityThe PTA is the reporting entity and there are no other related or affiliated bodies. d) Contributed equityAASB Interpretation 1038 Contributions by Owners Made to Wholly-Owned Public Sector Entities requires transfers in the nature of equity contributions, other than as a result of a restructure of administrative arrangements, to be designated by the Government (the owner) as contributions by owners (at the time of, or prior to transfer) before such transfers can be recognised as equity contributions. Capital appropriations have been designated as contributions by owners by TI 955 Contributions by Owners made to Wholly-Owned Public Sector Entities and have been credited directly to Contributed Equity. The transfers of net assets to/from other agencies, other than as a result of a restructure of administrative arrangements, are designated as contributions by owners where the transfers are non-discretionary and non-reciprocal. e) IncomeRevenue recognitionRevenue is recognised and measured at the fair value of consideration received or receivable. Revenue is recognised for the major business activities as follows: Sale of goods Provision of services Interest Lease income Operating subsidy contributions Grants, donations, gifts and other non-reciprocal contributions Other non-reciprocal contributions that are not contributions by owners are recognised at their fair value. Contributions of services are only recognised when a fair value can be reliably determined and the services would be purchased if not donated. Royalties for Regions funds are recognised as revenue at fair value in the period in which the PTA obtains control over the funds. The PTA obtains control of the funds at the time the funds are deposited into the PTA's bank account. Infringements GainsRealised and unrealised gains are usually recognised on a net basis. These include gains arising on the disposal of non-current assets and some revaluations of non-current assets. f) Borrowing costsAll borrowing costs are recognised as expenses in the period in which they are incurred. (See note 3 'Judgements made by management in applying accounting policies'). g) Infrastructure, property, plant and equipment and vehiclesCapitalisation/expensing of assets Initial recognition and measurement For items of infrastructure, property, plant and equipment and vehicles acquired at no cost or for nominal cost, the cost is their fair value at the date of acquisition. Subsequent measurement Where market-based evidence is available, the fair value of land and buildings is determined on the basis of current market buying values determined by reference to recent market transactions. When buildings are revalued by reference to recent market transactions, the accumulated depreciation is eliminated against the gross carrying amount of the asset and the net amount restated to the revalued amount. In the absence of market-based evidence, the fair value of land and buildings is determined on the basis of existing use. This normally applies where buildings are specialised or where land use is restricted. Fair value for existing use assets is determined by reference to the cost of replacing the remaining future economic benefits embodied in the asset, i.e. the depreciated replacement cost. Where the fair value of buildings is determined on the depreciated replacement cost basis, the gross carrying amount and the accumulated depreciation are restated proportionately. Land controlled by the PTA including metropolitan and regional corridor land, not subject to commercial lease, is revalued on an annual basis by the Western Australian Land Information Authority (Valuation Services) and recognised annually to ensure that the carrying amount does not differ materially from the asset's fair value at the end of reporting period. Land and buildings which are commercially leased are independently valued at fair value based on the capitalised value of current leases. Independent valuations are obtained annually. Buildings, bus infrastructure and Transwa rollingstock have been revalued at fair value using depreciated replacement cost by independent valuers, engineering and management professionals. Buses, vessels and urban rollingstock have been revalued utilising internal resources at fair value using depreciated replacement cost. Valuations are obtained every 3 to 5 years. The fair value is based on depreciated replacement cost as the assets are specialised and limited market-based evidence of value is available. Urban rail system infrastructure and freight network infrastructure are revalued, at least once every five years, to its fair value based on depreciated replacement cost, as the assets are specialised and limited market-based evidence of value is available. When assets carried at fair value are revalued, the accumulated depreciation is restated proportionately with the change in the gross carrying amount of the asset so that the carrying amount of the asset after revaluation equals its revalued amount. Construction in progress is recognised at cost. The most significant assumptions in estimating fair value are made in assessing whether to apply the existing use basis to assets and in determining estimated useful life. Professional judgement by the valuer is required where the evidence does not provide a clear distinction between market type assets and existing use assets. Derecognition The revaluation surplus included in equity in respect of an item of property, plant and equipment, infrastructure and vehicles may be transferred directly to retained earnings when the asset is derecognised. This may involve transferring the whole of the surplus when the asset is retired or disposed of. Asset revaluation surplus Depreciation Depreciation is calculated using the straight-line method, using rates which are reviewed annually. Estimated useful lives for each class of depreciable asset are:
Assets under construction are not depreciated until they are available for use. Land is not depreciated. h) Intangible assetsCapitalisation/Expensing of assets Intangible assets are initially recognised at cost. For assets acquired at no cost or for nominal cost, the cost is their fair value at the date of acquisition. The cost model is applied for subsequent measurement requiring the asset to be carried at cost less any accumulated amortisation and accumulated impairment losses. Amortisation for intangible assets with finite useful lives is calculated for the period of the expected benefit (estimated useful life which is reviewed annually) on the straight-line basis. All intangible assets controlled by the PTA have a finite useful life and zero residual value. The expected useful lives for each class of intangible asset are:
*Software that is not integral to the operation of any related hardware. Computer softwareSoftware that is an integral part of the related hardware is recognised as property, plant and equipment. Software that is not an integral part of the related hardware is recognised as an intangible asset. Software costing less than $5,000 is expensed in the year of acquisition. Website costsWebsite costs are charged as expenses when they are incurred unless they relate to the acquisition or development of an asset when they may be capitalised or amortised. Generally, costs in relation to feasibility studies during the planning phase of a website, and ongoing costs of maintenance during the operating phase are expensed. Costs incurred in building or enhancing a website, to the extent that they represent probable future economic benefits that can be reliably measured, are capitalised. LicencesLicences have a finite useful life and are carried at cost less accumulated amortisation and accumulated impairment losses. i) Impairment of assetsProperty, plant and equipment, infrastructure, vehicles and intangible assets are tested for any indication of impairment at the end of each reporting period. Where there is an indication of impairment, the recoverable amount is estimated. Where the recoverable amount is less than the carrying amount, the asset is considered impaired and is written down to the recoverable amount and an impairment loss is recognised. Where an asset measured at cost is written down to recoverable amount, an impairment loss is recognised in profit or loss. Where a previously revalued asset is written down to recoverable amount, the loss is recognised as a revaluation decrement in other comprehensive income. As the PTA is a not-for-profit entity, unless an asset has been identified as a surplus asset, the recoverable amount is the higher of an asset's fair value less costs to sell and depreciated replacement cost. The risk of impairment is generally limited to circumstances where an asset's depreciation is materially understated, where the replacement cost is falling or where there is a significant change in useful life. Each relevant class of assets is reviewed annually to verify that the accumulated depreciation/amortisation reflects the level of consumption or expiration of asset's future economic benefits and to evaluate any impairment risk from falling replacement costs. Intangible assets with an indefinite useful life and intangible assets not yet available for use are tested for impairment at the end of each reporting period irrespective of whether there is any indication of impairment. The recoverable amount of assets identified as surplus assets is the higher of fair value less costs to sell and the present value of future cash flows expected to be derived from the asset. Surplus assets carried at fair value have no risk of material impairment where fair value is determined by reference to market-based evidence. Where fair value is determined by reference to the depreciated replacement cost, surplus assets are at risk of impairment and the recoverable amount is measured. Surplus assets at cost are tested for indications of impairments at the end of each reporting period. j) Non-current assets (or disposal groups) classified as held for saleNon-current assets (or disposal groups) held for sale are recognised at the lower of carrying amount and fair value less costs to sell, and are disclosed separately from other assets in the Statement of Financial Position. Assets classified as held for sale are not depreciated or amortised. k) LeasesThe PTA has entered into a number of operating lease arrangements where the lessor effectively retains materially all of the risks and benefits incidental to ownership of the items held under the operating leases. Operating leases are expensed on a straight line basis over the term of the lease as this represents the pattern of benefits derived from the leased properties. l) Deferred income operating leasesThe sale of the Westrail Freight Business on 17 December 2000 included an operating lease of the freight network infrastructure for 49 years between the Western Australian Government Railways Commission (WAGR) – now Public Transport Authority of Western Australia (PTA) and Westnet Rail Pty Ltd – now Brookfield Rail Pty Ltd. The lease rentals were fully prepaid on 17 December 2000, and credited to deferred income operating leases. 133 grain receival sites were leased for a 99 year period in two tranches in 2003 and 2004. The rental for sites was prepaid and credited to deferred income operating leases. (See note 2(e)). m) Financial instrumentsIn addition to cash and cash equivalents, the PTA has two categories of financial instruments:
Financial instruments have been disaggregated into the following classes:
Initial recognition and measurement of financial instruments is at fair value which normally equates to the transaction cost or the face value. Subsequent measurement is at amortised cost using the effective interest method. The fair value of short-term receivables and payables is the transaction cost or the face value because there is no interest rate applicable and subsequent measurement is not required as the effect of discounting is not material. n) Cash and cash equivalentsFor the purpose of the Statement of Cash Flows, cash and cash equivalents (and restricted cash and cash equivalents) assets comprise of cash on hand. o) Accrued salariesAccrued salaries (refer to note 28 'Payables') represent the amount due to staff but unpaid at the end of the financial year. Accrued salaries are settled within a fortnight of the financial year end. The PTA considers the carrying amount of accrued salaries to be equivalent to its fair value. p) Amounts receivable for services (Holding account)The PTA received income from the State Government partly in cash and partly as an asset (holding account receivable) until 2011-12. From 2012-13, the PTA no longer receives funding into holding account receivable. The accrued amount appropriated is accessible on the emergence of the cash funding requirement to cover leave entitlements and asset replacement. q) InventoriesInventories are measured at the lower of cost and net realisable value. Costs are assigned by the method most appropriate to each particular class of inventory. Inventory recorded using the inventory control system is valued at the weighted average cost and the remainder is valued on a first in first out basis. Inventories not held for resale are measured at cost unless they are no longer required, in which case they are measured at net realisable value. r) ReceivablesReceivables are recognised at original invoice amount less an allowance for any uncollectible amounts (i.e. impairment). The collectability of receivables is reviewed on an ongoing basis and any receivables identified as uncollectible are written off against the allowance account. The allowance for uncollectible amounts (doubtful debts) is raised when there is objective evidence that the PTA will not be able to collect the debts. The carrying amount is equivalent to fair value as they are generally settled within 30 days. s) PayablesPayables are recognised at the amounts payable when the PTA becomes obliged to make future payments as a result of a purchase of assets or services. The carrying amount is equivalent to fair value, as settlement is generally 30 days. t) BorrowingsAll loans payable are initially recognised at fair value, being the net proceeds received. Subsequent measurement is at amortised cost using the effective interest rate method. u) ProvisionsProvisions are liabilities of uncertain timing or amount and are recognised where there is a present legal or constructive obligation as a result of a past event and when the outflow of resources embodying economic benefits is probable and a reliable estimate can be made of the amount of the obligation. Provisions are reviewed at the end of each reporting period. (i) Provisions - employee benefitsAll annual leave and long service leave provisions are in respect of employees' services up to the end of the reporting period. Annual leave When assessing expected future payments consideration is given to expected future wage and salary levels including non-salary components such as employer superannuation contributions, as well as the experience of employee departures and periods of service. The expected future payments are discounted using market yields at the end of the reporting period on national government bonds with terms to maturity that match, as closely as possible, the estimated future cash outflows. The provision for annual leave is classified as a current liability as the PTA does not have an unconditional right to defer settlement of the liability for at least 12 months after the end of the reporting period. Long service leave An actuarial assessment of long service leave undertaken by PriceWaterhouseCoopers Actuaries at 30 June 2013 determined that the liability measured using the short- hand measurement technique above was not materially different from the liability determined using the present value of expected future payments. This calculation is consistent with the PTA's experience of employee retention and leave taken. Unconditional long service leave provisions are classified as current liabilities as the PTA does not have an unconditional right to defer the settlement of the liability for at least 12 months after the end of the reporting period. Pre-conditional and conditional long service leave provisions are classified as non-current liabilities because the PTA has an unconditional right to defer the settlement of the liability until the employee has completed the requisite years of service. Sick leave Past history indicates that on average, sick leave taken each reporting period is less than the entitlement accrued. This is expected to continue in future periods. Accordingly, it is unlikely that existing accumulated entitlements will be used by employees and no liability for unused sick leave entitlements is recognised. As sick leave is non-vesting, an expense is recognised in the Statement of Comprehensive Income for this leave as it is taken. Deferred leave Purchased leave Superannuation Eligible employees contribute to the Pension Scheme, a defined benefit pension scheme closed to new members since 1987, or the Gold State Superannuation Scheme (GSS), a defined benefit lump sum scheme closed to new members since 1995. Employees commencing employment prior to 16 April 2007 who were not members of either the Pension Scheme or the GSS became non-contributory members of the West State Superannuation Scheme (WSS). Employees commencing employment on or after 16 April 2007 became members of the GESB Super Scheme (GESBS). From 30 March 2012, existing members of the WSS or GESBS and new employees have been able to choose their preferred superannuation fund provider. The PTA makes contributions to GESB or other fund providers on behalf of employees in compliance with the Commonwealth Government's Superannuation Guarantee (Administration) Act 1992. Contributions to these accumulation schemes extinguish the PTA's liability for superannuation charges in respect of employees who are not members of the Pension Scheme or GSS. The GSS is a defined benefit scheme for the purposes of employees and whole-of-government reporting. However, it is a defined contribution plan for agency purposes because the concurrent contributions (defined contributions) made by the PTA to GESB extinguishes the agency's obligations to the related superannuation liability. The PTA has no liabilities under the Pension Scheme or the GSS. The liabilities for the unfunded Pension Scheme and the unfunded GSS transfer benefits attributable to members who transferred from the Pension Scheme, are assumed by the Treasurer. All other GSS obligations are funded by concurrent contributions made by the PTA to the GESB. The GESB makes all benefit payments in respect of the Pension Scheme and GSS, and is recouped from the Treasurer for the employer's share. (ii) Provisions - otherEmployment on-costs Public liability Workers’
compensation Contaminated sites v) Superannuation expenseThe superannuation expense is recognised in the profit or loss in the Statement of Comprehensive Income and comprises employer contributions paid to the GSS (concurrent contributions), WSS, and the GESBS and other superannuation funds. w) Assets and services received free of charge or for nominal costAssets or services received free of charge (except those designated as contribution from owners) or for nominal cost are recognised as income at the fair value of the assets and/or the fair value of those services that can be reliably measured and the PTA would otherwise pay for. A corresponding expense is recognised for services received. Receipts of assets are recognised in the Statement of Financial Position. Assets or services received from other State Government agencies are separately disclosed under Income from State Government in the Statement of Comprehensive Income. x) Comparative figuresComparative figures are, where appropriate, reclassified to be comparable with the figures presented in the current financial year. Which of the following would be disclosed in the summary of significant accounting policies disclosure?Which of the following should be disclosed in the summary of significant accounting policies? The disclosure of information about major customers is required when the amount of sales to a single customer is 10% or more of the revenue of an entity.
What is the summary of significant accounting policies?It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred income tax is recognized, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the Balance Sheet.
Which of the following must be disclosed in the notes to the financial statements?Notes to the financial statements disclose the detailed assumptions made by accountants when preparing a company's: income statement, balance sheet, statement of changes of financial position or statement of retained earnings. The notes are essential to fully understanding these documents.
What is included in disclosure notes?Definition. Accounting disclosure notes are included in the footnotes to an entity's financial statements. These notes reveal certain important facts about an entity's finances that are not shown elsewhere in the financial statements.
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