Section 3: Budgeted financial statements
The budgeted departmental and administered 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 (incorporating the Australian Equivalents to International Financial Reporting Standards (AEIFRS)) and Statements of Accounting Concepts, as well as specific guidelines issued by the Department of Finance and Administration.
Analysis of budgeted financial statements
Departmental financial statements
Budgeted departmental income statement
ASIC is budgeting for a break-even operating result for 2005-06 and for the remainder of the forward estimates.
Appropriation for 2005-06 is $226.8 million, which is an increase of $27.6 million on the amount recognised in 2004-05. The rise in appropriation is attributed to the Government’s decision to fund ASIC for corporate insolvency law reform — strengthening creditor protection and deterring misconduct by company officers, the implementation of the Choice of Superannuation Fund, funding for the implementation of the United States-Australian Audit Regulation programme, increased funding for ongoing litigation and funding for the operation Wickenby investigation and prosecution. In addition, $6.7 million appropriated to ASIC in 2004-05 was reprofiled to 2005-06.
Total expenses including borrowing costs for 2005-06 are estimated to be $235.5 million, an increase of $26.9 million over the prior financial year. The expenditure will be used to fund activities that contribute towards achieving output objectives.
Budgeted total agency expenses 2005-06
Budgeted departmental balance sheet
This statement shows the financial position of ASIC. It helps decision-makers track the management of ASIC’s assets and liabilities.
Equity
ASIC’s budgeted equity (or net asset position) for 2005-06 is expected to be $13.7 million. This includes capital funding of $2.2 million for specific enforcement matters.
Financial assets
The $2.2 million (referred to in the equity section above) will be spent on the purchase of capital items. Accounts receivable for 2005-06 is expected to be $2.7 million, a reduction of $3.5 million. Of this reduction, $3.1 million relates to 2004-05 appropriation receivable, received in 2005-06.
Budgeted total agency assets 2005-06
Liabilities — interest bearing
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 have been prepared having regard to the estimated cost of equipment that will be leased under ASIC’s asset replacement program. Other interest bearing liabilities consists of amortised lease incentives, which decreases gradually over the expected life of the related leases.
Provisions and payables
The principal item under this heading is employee leave provisions and accruals which include annual and long service leave. Other provisions and payables consist of a make-good provision for leased premises, which decreases gradually over the expected life of the related leases.
Budgeted total agency liabilities 2005-06
Budgeted financial statements
Departmental financial statements
Budgeted departmental income statement
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 departmental balance sheet
This statement shows the financial position of ASIC. It helps decision-makers track the management of ASIC’s assets and liabilities.
Budgeted departmental 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.
Departmental statement of changes in equity — summary of movement
This statement shows the changes in the equity position of ASIC. It helps decision-makers track the management of ASIC’s equity.
Departmental capital budget statement
This statement shows all proposed capital expenditure funded from appropriations or from internal sources.
Departmental property, plant, equipment and intangibles — summary of movement
This statement shows the movement in ASIC’s non-financial assets during the Budget year.
Schedule of administered activity
Details of transactions administered by ASIC on behalf of the Australian Government are shown in the following notes to the financial statements.
Schedule of budgeted income and expenses administered on behalf of government
The schedule 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 and the Life Insurance Act 1995.
Revenues from Government include the budgeted amount of appropriation required to pay claimants for unclaimed monies previously transferred to consolidated revenue, and to establish a fund to finance investigations of breaches of directors’ duties and fraudulent conduct under the corporate insolvency law reform legislation.
Expenses represent the budget estimated for the payment of unclaimed monies and overpayments referred to above, the budgeted estimate for bad debt expense and payments to registered insolvency practitioners to investigate breaches of directors’ duties and fraudulent conduct under the corporate insolvency law reform legislation.
Other revenue represents the amount of fees and charges budgeted to be levied under the Corporations Act 2001. The increase in 2005-06 is the result of an increase in the number of companies being incorporated.
Schedule of budgeted assets and liabilities administered on behalf of government
Financial Assets
The amount shown for receivables in 2005-06 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 the over payments of annual review and other fees under the Corporations Act 2001.
Schedule 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 departmental income statement (for the period ended 30 June)
Table 3.2: Budgeted departmental balance sheet (as at 30 June)
1 The reduction in receivable from 2004-05 to 2005-06 is mainly attributable to the drawdown in 2005-06 of Appropriation Receivable recognised in 2004-05.
* ‘Equity’ is the residual interest in assets after deduction of liabilities.
Table 3.3: Budgeted departmental statement of cash flows (for the period ended 30 June)
Table 3.4: Departmental statement of changes in equity — summary of movement (Budget year 2005-06)
Table 3.5: Departmental capital budget statement
Table 3.6: Departmental property, plant, equipment and intangibles — summary of movement
(Budget year 2005-06)
Table 3.7: Schedule of budgeted income and expenses administered on behalf of government (for the period ended 30 June)
Table 3.8: Schedule of budgeted assets and liabilities administered on behalf of government (as at 30 June)
Table 3.9: Schedule of budgeted administered cash flows (for the period ended 30 June)
Table 3.10: Schedule of administered capital budget
This table is not applicable to ASIC.
Table 3.11: Schedule of administered property, plant, equipment and intangibles — summary of movement (Budget year 2005-06)
This table is not applicable to ASIC.
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 that 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 2004, 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.
Asset recognition threshold
Purchases of property, plant and equipment are recognised initially at cost in the statement of financial position, except for purchases costing less than $2,000, which are expensed in the year of acquisition.
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 lower of fair value or 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 income statement on a basis that is representative of the pattern of benefits derived from the lease assets.
Depreciation and amortisation
Computer equipment is depreciated using the declining-balance method whilst, for all other plant and equipment, the straight-line method of depreciation is applied. 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.
Receivables
A provision is raised for any doubtful debts based on a review of the collectability of all outstanding accounts as at year-end.
Bad debts are written off during the year in which they are identified.
Provisions and payables
Provisions and payables represent liabilities for miscellaneous accruals and employee benefits, including accrued salary and leave entitlements and provisions for making-good leased premises. No provision for sick leave is required as all sick leave is non-vesting.
Schedule of budgeted revenues and expenses administered on behalf of government
Revenues
Non-taxation revenues are predominately comprised of revenues from government, required for refunds paid under the Banking Act 1959 and the Life Insurance Act 1995, and Corporations Act 2001 fees and charges.
Write down and impairment of assets
Write down and impairment of assets represents waivers and write-offs of Corporations Law fees.
Schedule of budgeted assets and liabilities administered on behalf of government
Financial assets
The financial assets include Corporations Law debt invoiced and still outstanding at year-end.
Schedule of budgeted administered cash flows
All cash collected by ASIC for Corporations Law revenue, is transferred to the Official Public Account (OPA) at the close of business each day. Cash collected for Banking Act 1959 unclaimed monies and Life Insurance Act 1995 unclaimed monies is transferred to the OPA when received.