Section 3: Budgeted financial statements

The budgeted agency and financial statements and related notes for the Australian Securities and Investments Commission (ASIC) are presented in this section. The financial statements should be read in conjunction with the accompanying notes. The Budget estimate and three forward years comprise the following statements.

The budgeted financial statements contain estimates prepared in accordance with the requirements of the Australian Government’s financial budgeting and reporting framework, including the principles of Australian Accounting Standards and Statements of Accounting Concepts, as well as specific guidelines issued by the Department of Finance and Administration.

Analysis of budgeted financial statements

Budgeted agency statement of financial performance

The estimated actual operating result for 2003-04 is an approved loss of $5.0 million, attributable to an increase in expenses arising from increased activity levels. The Australian Government has increased ASIC’s funding in 2004-05 to address the expected loss.

Total expenses including borrowing costs for 2004-05 are estimated to be $206.7 million, an increase of $4.1 million over the prior financial year. The expenditure will be used to fund increased activity levels arising from the increasing demands for ASIC’s services including actioning complaints and increased surveillance and enforcement activities.

ASIC is budgeting for a breakeven operating result for 2004-05 and for the remainder of the forward estimates.

Budgeted agency statement of financial position

This statement shows the financial position of ASIC. It helps decision-makers to track the management of ASIC’s assets and liabilities.

Equity

ASIC’s budgeted equity (or net asset position) for 2004-05 will increase by $11.3 million to address accumulated past year losses.

This equity injection will place ASIC in a positive equity position and is reflected as an increase in cash and in total equity.

Financial Assets

The increase in cash arising from the equity injection of $11.3 million referred to above, has resulted in total financial assets increasing by approximately the same amount.

Non-Financial Assets

A revaluation of leasehold improvements occurred during 2003-04 in accordance with ASIC’s policy to revalue all classes of non-financial assets every three years. This revaluation increased the written down fair value of leasehold improvements by $2.6 million.

The overall value of non-financial assets is not expected to materially increase in 2004-05.

Liabilities – Debt

The principal item under this heading is the estimated amount owing by ASIC in respect of finance leases for computer equipment and peripherals. The forward estimates assume that ASIC will continue to lease all future equipment acquisitions made in accordance with its asset replacement programme.

Provisions and payables

The principal item under this heading is employee leave provisions and accruals. The amount is expected to decline as a percentage of total salaries over the forward estimates as the provisions of the Certified Agreement take effect.

Agency financial statements

Budgeted agency statement of financial performance

This statement provides the expected financial results for ASIC by identifying full accrual expenses and revenues, which highlights whether the agency is operating at a sustainable level.

Budgeted agency statement of financial position

This statement shows the financial position of ASIC. It helps decision-makers to track the management of ASIC’s assets and liabilities.

Budgeted agency statement of cash flows

Budgeted cash flows, as reflected in the statement of cash flows, provide important information on the extent and nature of cash flows by categorising them into expected cash flows from operating activities, investing activities and financing activities.

Agency capital budget statement

This statement shows all proposed capital expenditure funded through the Budget as appropriation or from internal sources.

Agency non-financial assets — summary of movement

This statement shows the movement in ASIC’s non-financial assets during the budget year.

Note of administered activity

The financial results from revenue and special appropriations administered by ASIC on behalf of the Australian Government are shown in the following notes to the financial statements.

Note of budgeted administered financial performance

The statement of financial performance shows the revenue and expenses associated with the collection of revenue under the Corporations Act 2001, and ASIC’s responsibilities in administering unclaimed monies under the Banking Act 1959, the Life Insurance Act 1995 and the Corporations Act 2001.

Revenues from government include the budgeted amount of appropriation required to pay claimants for unclaimed monies previously transferred to consolidated revenue and refunds for overpaid fees and charges under the Corporations Act 2001.

Expenses represent the budget estimate for the payment of unclaimed monies and overpayments referred to above and the budgeted estimate for bad debt expense.

Other revenue represents the amount of fees and charges budgeted to be levied under the Corporations Act 2001. The increase in 2004-05 is the result of an increase in the number of companies being incorporated and an increase in the annual review fee of $12.00. This is the first increase in the annual review fee since 1997.

Note of budgeted administered financial position

Financial Assets

The amount shown for receivables in 2003-04 and in the forward estimates is the estimated amount of fees and charges under the Corporations Act 2001 remaining unpaid.

Liabilities — payables

The amounts shown in the forward estimates represent the estimated amount of refunds relating to over payments of annual review and other fees under the Corporations Act 2001.

Note of budgeted administered cash flows

Budgeted administered cash flows provide important information on the extent and nature of cash flows by categorising them into expected cash flows from operating activities, investing activities and financing activities.

Table 3.1: Budgeted Agency Statement of Financial Performance
for the period ended 30 June

1. K1 shows the link back to Table 1.1.
2. An amount of $3 million appropriated in 2003-04 has been reprofiled to 2004-05 and is reflected in the statement of financial performance as a dividend payment to government in 2003-04 and corresponding increase in ASIC's 2004-05 appropriation.

Table 3.2: Budgeted Agency Statement of Financial Position
as at 30 June

Table 3.3: Budgeted Agency Statement of Cash Flows
for the period ended 30 June

Table 3.4: Agency Capital Budget Statement

1. K3 shows the link back to Table 1.1.

Table 3.5: Agency Non-financial Assets — Summary of Movement
(Budget year 2004-05)

Table 3.6: Note of Budgeted Financial Performance Administered on behalf of Government for the period ended 30 June

1. K2 shows the link back to Table 1.1.

Table 3.7: Note of Budgeted Financial Position Administered on behalf of Government as at 30 June

Table 3.8: Note of Budgeted Administered Cash Flows
for the period ended 30 June

Notes to the financial statements

Basis of accounting

The financial statements have been prepared on an accrual basis and in accordance with the historical cost convention.

Budgeted agency financial statements

Under the Australian Government’s accrual budgeting framework, and consistent with Australian Accounting Standards, transactions that agencies control (departmental transactions) are separately budgeted for and reported on from transactions agencies do not have control over (administered transactions). This ensures that agencies are only held fully accountable for the transactions over which they have control.

Departmental items are those assets, liabilities, revenues and expenses in relation to an agency or authority that are controlled by the agency. Departmental expenses include employee and supplier expenses and other administrative costs, which are incurred by the agency in providing its goods and services.

Administered items are revenues, expenses, assets and liabilities that are managed by an agency or authority on behalf of the Australian Government according to set government directions. Administered expenses and administered revenues include taxes, fees, fines and expenses that have been earmarked for a specific purpose by government.

Appropriations in the accrual budgeting framework

Under the Australian Government’s accrual budgeting framework, separate annual appropriations are provided for:

• departmental price of outputs appropriations representing the Australian Government’s purchase of outputs from agencies;
• departmental capital appropriations for investments by the Australian Government for either additional equity or loans in agencies;
• administered expense appropriations for the estimated administered expenses relating to an existing outcome or a new outcome; and
• administered capital appropriations for increases in administered equity through funding non-expense administered payments.

Asset valuation

From 1 July 2002, Australian Government agencies and authorities are required to use either the cost basis or the fair value basis to value infrastructure, plant and equipment and leasehold improvements on a three yearly revaluation cycle. ASIC has adopted fair value as a basis for valuing its non-current assets.

Leases

A distinction is made between finance leases, which effectively transfer from the lessor to the lessee substantially all the risks and benefits incidental to ownership of leased non-current assets, and operating leases under which the lessor effectively retains substantially all such risks and benefits.

Where a non-current asset is acquired by means of a finance lease, the asset is capitalised at the present value of minimum lease payments at the inception of the lease and a liability recognised for the same amount. Leased assets are amortised over the period of the lease. Lease payments are allocated between the principal component and the interest expense.

Operating lease payments are charged to the statement of financial performance on a basis that is representative of the pattern of benefits derived from the lease assets.

Depreciation and amortisation

Depreciable plant and equipment and leased information technology assets are written off to their estimated residual values over their estimated useful lives using in all cases the straight line method of depreciation. Leasehold improvements are amortised on a straight line basis over the lesser of the estimated life of the improvements or the unexpired period of the lease.

Depreciation/amortisation rates (useful lives) are reviewed at each balance date and necessary adjustments are recognised.

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